Oddo Corporation makes a product with the following standard costs Standard Quan

Question

Oddo Corporation makes a product with the following standard costs Standard Quantity or Standard Price or Standard Cost Direct materials Direct labor Variable overhead Hours 3.0 ounces 0.7 hours 0.7 hours Rate $9.50 per ounce $15.50 per hour $8.00 per hour Per Unit $28.50 $10.85 $5.60 The company reported the following results concerning this product in December Originally budgeted output Actual output Raw materials used in production Actual direct labor-hours Purchases of raw materials Actual price of raw materials Actual direct labor rate Actual variable overhead rate 9,200 units 9,000 units 6.680 ounces 6.5001 hours 28.280ounces 9.25 per ounce 14.85 per hour 710 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased The materials price varlance ror December is: 0 $7,070 U 0 $7070 F O $9,710 U 0 $9,710 F

Explanation / Answer

Materials price variance = AQ*(AP-SP)= 28280*(9.25-9.5)= 7070 F Option 2 is correct

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