The following materials standards have been established for aparticular product:
ID: 2433953 • Letter: T
Question
The following materials standards have been established for aparticular product: Standard quantity per unit of output......6.8 meters Standard price..................................... 14.40 permeter The following data pertain to operations concerning theproduct for the last month: Acual materials purchased.................... 4,400meters Actual cost of materials purchased........ 60,500 Actual materilas used in production....... 3,800meters Actual output........................................ 400 units What is the materials price varience for themonth? 1. 14,850 U 2. 8,250 U 3. 8,640 U 4. 2,860 F Thank you! The following materials standards have been established for aparticular product: Standard quantity per unit of output......6.8 meters Standard price..................................... 14.40 permeter The following data pertain to operations concerning theproduct for the last month: Acual materials purchased.................... 4,400meters Actual cost of materials purchased........ 60,500 Actual materilas used in production....... 3,800meters Actual output........................................ 400 units What is the materials price varience for themonth? 1. 14,850 U 2. 8,250 U 3. 8,640 U 4. 2,860 F Thank you! Thank you!Explanation / Answer
The formula for calculating material price variance is
Material price variance (MPV) = Actual quantity purchased(Standard cost - Actual cost)
Given Standard cost = 14.40 per meter
Actual cost = Actual cost of materials purchased / Actualmaterials purchased
= 60500 / 4400 = 13.75 per meter
MPV = 4400 (14.40 – 13.75) = 4400 (0.65) = 2860
Conclusion: Hence, option 4 is the correct option.
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