Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: During March, the following activity was recorded by the company:The company produced 2,400 units during the month.A total of 19,400 pounds of material were purchased at a cost of $13,580.There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.Variable manufacturing overhead costs during March totaled $14,061.The direct materials purchases variance is computed when the materials are purchased.The materials price variance for March is:

A) $1,940 Unfavorable
B) $1,940 Favorable
C) $1,750 Favorable
D) $1,750 Unfavorable

Question

Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

During March, the following activity was recorded by the company:The company produced 2,400 units during the month.A total of 19,400 pounds of material were purchased at a cost of $13,580.There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.Variable manufacturing overhead costs during March totaled $14,061.The direct materials purchases variance is computed when the materials are purchased.The materials price variance for March is:

A) $1,940 Unfavorable
B) $1,940 Favorable
C) $1,750 Favorable
D) $1,750 Unfavorable

Christie Czajka · Accepted Answer

Final Answer : A, Explanation :  To compute the materials price variance, we need to compare the actual price paid for materials to the standard price. The total cost of materials purchased during March is $13,580 for 19,400 pounds, which gives an average price of $0.70 per pound ($13,580 ÷ 19,400 pounds). The standard price is given as $0.75 per pound, so the materials price variance is:(Standard price - Actual price) x Actual quantity = ($0.75 - $0.70) x 19,400 pounds = $970 UTherefore, the materials price variance for March is $970 unfavorable.

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