Abba Company produces sails for boats. The Houston plant uses a standard costing

Question

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor.

There are no beginning or ending inventories for direct materials.

For direct materials, what is the price variance?

Standards     Cloth (Direct Materials)         Standard Price $ 4.31     Direct Labor         Standard Rate $ 12.35 December Data     Number of Sails Produced 23,384     Cloth (Direct Materials)         Actual Price $ 4.81         Actual Usage 103,772 square yards         Standard Quantity Allowed (given production) 119,668 square yards     Direct Labor         Actual Rate $ 13.56         Actual Usage 20,050 hours         Standard Quantity Allowed (given production) 21,581 hours

Explanation / Answer

SOLUTION

Direct material price variance = (Standard price - Actual Price) * Actual quantity

= ($4.31 - $4.81) * 103,772

= $0.50  * 103,772

= $51,886 U

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