Alpha Company manufactures Product P and sells it in packs of 10 units. The actu

Question

Alpha Company manufactures Product P and sells it in packs of 10 units. The actual results for the first week in January are as follows: Actual production 25,000 packs of Product P

Actual cost of raw material Q 97,500 units at $0.90

Actual cost of labor 480 hours at $6.75

Standard quantity of raw material 96,000 units for 30,000 units of Product P

Standard price of raw material Q $0.95

Calculate the total material variance for Product P for the first week in January.

a. $16,625 U

b. $4,875 F

c. $3,450 F

d. $11,750 U

Explanation / Answer

Answer is B

Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity                                                              = ( 0.95 - 0.90) x 97500                                                              = 4875 Fav

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