The following data is given for the Stringer Company Budgeted production Actual

Question

The following data is given for the Stringer Company Budgeted production Actual production Materials: 26,000 units 27,500 units $6.50 Standard price per ounce Standard ounces per completed unit Actual ounces purchased and used in production Actual price paid for materials Labor: Standard hourly labor rate Standard hours allowed per completed unit Actual labor hours worked Actual total labor costs Overhead: Actual and budgeted fixed overhead Standard variable overhead rate Actual variable overhead costs 228,000 $1,504,800 $22 per hour 6.6 183,000 $4,020,000 $1,029,600 $24.50 per standard labor hour $4,520,000 Overhead is applied on standard labor hours. The direct materials price variance is a. $52,000 unfavorable b. $22,800 unfavorable Oc. $22,800 favorable d. $52,000 favorable

Explanation / Answer

Answer is option (b) $22800 unfavourable

Explanation;

Formula for Direct Material Price Variance;

(Standard Price – Actual Price) * Actual Quantity Used

Standard price = $6.50 per ounce

Actual price is calculated as follow;

Actual price paid materials / Actual quantity used

= $1504800 / 228000 = $6.60 per ounce

Actual quantity used is given = 228000

Now put the values in the formula to know direct material price variance;

($6.50 – $6.60) * 228000

= - $0.10 * 228000

= $22800 (unfavourable)

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