Question

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 What is James' materials price variance assuming that materials purchased equals materials used?

Answer 1

Answer:

Direct material price variance= $700,000 favorable

Explanation:

Giving the following information:

It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17

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

Direct material price variance= (3 - 2.5)*1,400,000= $700,000 favorable