Asked by McGwire Midkiff on May 20, 2024
Verified
Fluegge Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
The company has reported the following actual results for the product for December:
The raw materials price variance for the month is closest to:
A) $15,060 Unfavorable
B) $14,016 Favorable
C) $15,060 Favorable
D) $14,016 Unfavorable
Raw Materials Price Variance
The difference between the actual cost of raw materials and the standard cost multiplied by the actual quantity used.
- Measure the differences in materials' quantity and pricing to evaluate how effectively materials are used and costs are managed.
Verified Answer
MF
MBA FT 2018-20
May 21, 2024
Final Answer :
C
Explanation :
Raw Materials Cost Variance can be calculated using the following formula:
Actual Quantity Purchased (AQ) x (Actual Price (AP) - Standard Price (SP))
For the given information,
AQ = 18,000 pounds
AP = $5.20 per pound
SP = $5.60 per pound
Raw Materials Cost Variance = 18,000 x ($5.20 - $5.60) = $15,060 Favorable.
Therefore, the correct answer is C.
Actual Quantity Purchased (AQ) x (Actual Price (AP) - Standard Price (SP))
For the given information,
AQ = 18,000 pounds
AP = $5.20 per pound
SP = $5.60 per pound
Raw Materials Cost Variance = 18,000 x ($5.20 - $5.60) = $15,060 Favorable.
Therefore, the correct answer is C.
Learning Objectives
- Measure the differences in materials' quantity and pricing to evaluate how effectively materials are used and costs are managed.
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