Question

Zeta Corporation is a manufacturer of sports caps, which require soft fabric. The standards for each cap allow 2.00 yards of soft at a cost of $2.00 per yard. During the month of January, the company purchased 25,000 yards of soft fabric at $2.10 per yard, to produce 12,000 caps. What is Zeta Corporation's materials price variance for the month of January? a. $2.000 F b. $2,000 U c. $2.500 F d. $2,500 U

Answer 1

Direct material price variance= $2,500 favorable

Step-by-step explanation:

Giving the following information:

The standards for each cap allow 2.00 yards of soft for $2.00 per yard. During January, the company purchased 25,000 yards of soft fabric at $2.10 per yard, to produce 12,000 caps.

To calculate the direct material price variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (2 - 2.1)*25,000

Direct material price variance= $2,500 favorable