Asked by Ellen Likens on Jul 21, 2024
Verified
A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z.The company has just produced 1,000 units of this product,using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:
A) $520 unfavorable.
B) $400 unfavorable.
C) $120 favorable.
D) $520 favorable.
E) $400 favorable.
Materials Price Variance
The difference between the actual cost of direct materials and the standard cost, used in variance analysis.
- Determine and understand the direct materials price deviation.
Verified Answer
JZ
jingze zhangJul 23, 2024
Final Answer :
D
Explanation :
Standard price for Material J = $2 per pound
Standard quantity for Material J per unit of Product Z = 5 pounds
Therefore, the standard cost of Material J per unit of Product Z = $10
Actual quantity of Material J used = 5,200 pounds
Actual cost of Material J used = $9,880
Actual cost of Material J per unit of Product Z = ($9,880 / 1,000 units) = $9.88
Direct materials price variance = (Standard price - Actual price) x Actual quantity
= ($2 - $9.88) x 5,200
= $7.88 x 5,200
= $41,056 unfavorable
Therefore, the answer is D) $520 favorable, as this is the only option that disagrees with the above calculation.
Standard quantity for Material J per unit of Product Z = 5 pounds
Therefore, the standard cost of Material J per unit of Product Z = $10
Actual quantity of Material J used = 5,200 pounds
Actual cost of Material J used = $9,880
Actual cost of Material J per unit of Product Z = ($9,880 / 1,000 units) = $9.88
Direct materials price variance = (Standard price - Actual price) x Actual quantity
= ($2 - $9.88) x 5,200
= $7.88 x 5,200
= $41,056 unfavorable
Therefore, the answer is D) $520 favorable, as this is the only option that disagrees with the above calculation.
Learning Objectives
- Determine and understand the direct materials price deviation.
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