Asked by Vanessa Massie on Jun 13, 2024
Verified
Milar Corporation makes a product with the following standard costs: In January the company produced 4,600 units using 10,120 pounds of the direct material and 2,100 direct labor-hours. During the month, the company purchased 10,690 pounds of the direct material at a cost of $76,570. The actual direct labor cost was $38,256 and the actual variable overhead cost was $11,957.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 variance for January is:
A) $1,600 Unfavorable
B) $1,740 Favorable
C) $1,740 Unfavorable
D) $1,600 Favorable
Direct Materials
Raw materials and components used in the manufacturing process that are directly incorporated into the final product.
Direct Labor-Hours
Represents the total hours worked by employees directly involved in the manufacturing process.
Variable Overhead
Costs that fluctuate with production volume, such as utilities and raw materials, contrasting with fixed overhead costs.
- Calculate and analyze direct material variances including price and quantity variances.
Verified Answer
(Actual Quantity Purchased x Actual Price) - (Actual Quantity Purchased x Standard Price)
= (10,690 x $7.17) - (10,690 x $6.80)
= $76,848.30 - $72,952
= $3,896.30 unfavorable
So the answer is C, $1,740 Unfavorable.
Learning Objectives
- Calculate and analyze direct material variances including price and quantity variances.
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