Oceanside Marine Company manufactures special metallic materials and decorative

Question

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:

Direct materials: 22 pound per unit; $12 per pound

Direct labor: 22 hours per unit; $20 per hour

Oceanside produced 1,000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were $99,300. What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

A. $9,300 Unfavorable

B.$1,240 Unfavorable

C. 9,300 Favorable

D. $1,240 Favorable

Explanation / Answer

DM Price Variance = ( SP AP ) × AQ

Where,
   SP is the standard unit price of direct material
   AP is the actual price per unit of direct material
   AQ is the actual quantity of direct material used

Direct material price =$12 per pound

Actual quantity of material used to manufacture 1000 units =7500 pounds

Direct material actual cost=99300

Direct Materia Price Variance =SP* AQ-AP*AQ=12*7500-99300=-9300

Unfavourable price variance

DM Price Variance = ( SP AP ) × AQ

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