A company uses the following standard costs to produce a single unit of output.

Question

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at $0.90 per pound = $5.40 Direct labor 0.5 hour at $12.00 per hour = $6.00 Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:

Explanation / Answer

Std price per pound: $ 0.90 per pound Actual Price per pound: $ 1.00 per pound Actual Quantity used: 58000 pounds Material price variance: Actual Qty used (Std price-Actual price) 58000 (0.90 -1.00) = $ 5800 Unfavorable

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