X operates a standard marginal costing system. The following budgeted and standa

Question

X operates a standard marginal costing system. The following budgeted and standard cost information is available: Budgeted production and sales                    10,000 units                                                                     Direct material cost – 3 kg x $10                           $30 per unit Actual results for the period were as follows: Production and sales                                            11,500 units Direct material – 36,000 kg                               $342,000 The direct material price variance is A. $18,000 adverse B. $3,000 adverse C. $3,000 favourable D. $18,000 favourable  

Explanation / Answer

Answer: D - $18,000 (favorable)

Direct material price variance = Actual material (Standard prrice - Actual price)

= 36000($10 - $342,000/36000) = $18,000 (favorable)

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