Question

Fletcher Company collected the following data regarding production of one of its products. Compute the total direct materials cost variance.

Direct materials standard (6 lbs. @ $2/lb.) $ 12 per finished unit
Actual direct materials used 243,000 lbs.
Actual finished units produced 40,000 units
Actual cost of direct materials used $ 483,570

(A) $6,000 favorable.
(B) $3,570 unfavorable.
(C) $2,430 favorable.
(D) $6,000 unfavorable.
(E) $3,570 favorable.

Answer 1

Answer:

Option (B) $3,570 unfavorable

Explanation:

Data provided in the question:

Direct materials standard (6 lbs. @ $2/lb.) =  $ 12 per finished unit

Actual direct materials used = 243,000 lbs.

Actual finished units produced = 40,000 units

Actual cost of direct materials used = $483,570

Now,

Total direct materials variance

= Budgeted cost of direct material - Actual cost of direct materials used

= ( 40,000 × $12 ) - $483,570

= $480,000- $483,570

= - $3,570

The negative value depicts Unfavorable

Hence,

Option (B) $3,570 unfavorable