Sanford Ltd. produces a product with the following standard cost card: Direct ma
ID: 2544825 • Letter: S
Question
Sanford Ltd. produces a product with the following standard cost card:
Direct materials (19 kg)
$49.86
Direct labour (7 hours)
84.00
Variable overhead (7 hours)
21.00
Fixed overhead (7 hours)
35.00
The fixed overhead rate is based on a standard monthly volume of 15976 units.
The actual results for the month of July 20x5 are as follows:
Direct materials purchased and used (381027 kg)
$609265
Direct labour (93,000 hours)
1,023,000
Variable overhead
320,000
Fixed overhead
580,000
Units produced and sold
15,500 units
What is Sanford’s direct materials price variance for July 20x5? Note: a negative number represents an unfavourable variance and a positive number represents a favourable variance.
Direct materials (19 kg)
$49.86
Direct labour (7 hours)
84.00
Variable overhead (7 hours)
21.00
Fixed overhead (7 hours)
35.00
Explanation / Answer
Direct materials price variance = Standard cost of actual quantiy - Actual cost
= (Actual quantity purchased and used × Standard rate) – $609,265
= (381,027 kg × ($49.86/19kg) - $609,265
=$999,895 - $609,265
=$390,630 (Favorable variance)
Actual cost of $609,265 is less than standard cost of actual quantity of $999,895, hence it is favorable variance
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.