The standard costs and actual costs for direct materials, direct labor, and fact

Question

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity – 10,000 hrs.):

Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000

The following data relate to direct materials costs for November:

Actual costs 4,500 pounds at $6.00
Standard costs 4,600 pounds at $5.50

What is the direct materials price variance?


a. $2,250 favorable

b. $2,250 unfavorable
c. $2,300 unfavorable
d. $1,700 unfavorable

Explanation / Answer

The direct materials price variance

= (Standard rate -Actual Rate)*Actual Unit purchase

= (5.50-6.00)*4500

= $2250 Unfavorable

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