James Company manufactures t-shirts. During the year, it manufactured 250,000 t-

Question

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are:

$18.00

19.20

It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts.

Refer to Figure 10-9. What is James’ materials price variance assuming that materials purchased equals materials used?

$18.00

19.20

Explanation / Answer

Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity Purchased                                                              = ( 3 - 2.5) x 1400000                                                              = 700000 Fav

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