Doogan Corporation makes a product with the following standard costs: The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 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 variance for January is:

A) $13,320 Unfavorable
B) $13,320 Favorable
C) $11,544 Favorable
D) $11,544 Unfavorable

Question

Doogan Corporation makes a product with the following standard costs:

The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 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 variance for January is:

A) $13,320 Unfavorable
B) $13,320 Favorable
C) $11,544 Favorable
D) $11,544 Unfavorable

Aqila Camalya · Accepted Answer

Final Answer : B, Explanation :  Materials Price Variance = AQ(AP - SP)Where, AQ = actual quantity purchased = 44,400 gramsAP = actual price paid = $1.70/gramSP = standard price = $1.80/gramMaterials Price Variance = 44,400($1.70 - $1.80)Materials Price Variance = $13,320 (Favorable)Therefore, the answer is B) $13,320 Favorable.

Definitions

Learning Objectives

Learning Objectives

Related questions