Multiple Choice QuestionABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct materials price variance.Multiple choice question.$500 F$720 U$720 F$500 U
Question
Multiple Choice QuestionABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ 10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of 374,400. Compute the direct materials price variance.Multiple choice question.720 U500 U
Solution 1
The direct materials price variance can be calculated using the formula:
(Actual Quantity x Standard Price) - (Actual Quantity x Actual Price)
First, we need to find the standard price and the actual price per pound.
Standard Price = 17,280 / 18,000 pounds = $0.96 per pound
Now, we can substitute these values into the formula:
(18,000 pounds x 0.96 per pound) = 17,280 = $720
Since the actual cost is less than the standard cost, the variance is favorable. So, the answer is $720 F.
Solution 2
No answer
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