Question

The following data is given for the Stringer Company: Budgeted production 26,000 units Actual production 27,500 units Materials: Standard price per ounce $6.50 Standard ounces per completed unit 8 Actual ounces purchased and used in production 228,000 Actual price paid for materials $1,504,800 Labor: Standard hourly labor rate $22 per hour Standard hours allowed per completed unit 6.6 Actual labor hours worked 183,000 Actual total labor costs $4,020,000 Overhead: Actual and budgeted fixed overhead $1,029,600 Standard variable overhead rate $24.50 per standard labor hour Actual variable overhead costs $4,520,000 ​ Overhead is applied on standard labor hours. The direct materials price variance is

Select one:

a. $22,800 unfavorable
b. $22,800 favorable
c. $52,000 unfavorable
d. $52,000 favorable

Answer 1

Answer:

$22,800 unfavorable

Explanation:

The computation of the material price variance is shown below:

= Actual Quantity × (Standard Price - Actual Price)

= 228,000  × ($6.50 - $1,504,800  ÷ 228,000)

= 228,000 × ($6.50 - $6.6)

= 228,000 × $0.1

= $22,800 unfavorable

The actual price is computed below:

= Actual price paid for materials ÷ Actual ounces purchased and used in production

=  $1,504,800 ÷ 228,000

= $6.6