Question

Milar Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or Rate Direct materials 2.0pounds$7.00per pound Direct labor 0.8hours$16.00per hour Variable overhead 0.8hours$4.00per hour In January the company produced 4,500 units using 10,260 pounds of the direct material and 2,240 direct labor-hours. During the month, the company purchased 10,830 pounds of the direct material at a cost of $76,710. The actual direct labor cost was $38,236 and the actual variable overhead cost was $11,937. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

Answer 1

Answer:

866.4 Unfavorable

Explanation:

Standard rate (SR) = $7.00 per pound

Pounds of direct material purchased, Actual quantity (AQ) = 10,830 pounds

Actual rate (AR):

= Cost of direct material ÷ Pounds of direct material purchased

= $76,710 ÷ 10,830 pounds

= $7.08

Materials price variance for January:

= (Standard rate - Actual rate) × Actual quantity

= (7.00 - 7.08) × 10,830 pounds

= 0.08 × 10,830 pounds

= 866.4 Unfavorable