Landram Corporation makes a product with the following standard costs: In March

Question

Landram Corporation makes a product with the following standard costs:

In March the company produced 4,700 units using 10,160 kilos of the direct material and 2,140 direct labor-hours. During the month, the company purchased 10,730 kilos of the direct material at a cost of $76,610. The actual direct labor cost was $38,252 and the actual variable overhead cost was $11,953.

Inputs Standard Quantity or Hours Standard Price or Rate Direct materials 2.0 kilos $7.00 per kilo Direct labor 1.0 hours $18.00 per hour Variable overhead 1.0 hours $2.00 per hour

Explanation / Answer

Hi,

Please find the answer as follows:

Materials Price Variance = Actual Quantity of Material*(Actual Rate - Standard Rate) = 10730*(76610/10730 - 7) = 1500 (U)

Answer is Option A (1500 U).

Notes:

Actual Rate = Total Cost of Material Purchased/Actual Quantity of Material

Thanks.

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