Asked by Leighton Schoolcraft on Mar 10, 2024

Verified

The raw materials price variance for the month is closest to:

A) $9,081 U

B) $9,450 F

C) $9,450 U

D) $9,081 F

A) $9,081 U

B) $9,450 F

C) $9,450 U

D) $9,081 F

Raw Materials Price

The cost of raw materials required in the manufacturing process, a critical factor in the overall production cost and pricing strategy.

Variance

The difference between a planned, budgeted, or standard amount and the actual amount incurred or realized.

- Determine the price variance for materials and supplies and assess its effect on cost management.

Verified Answer

SV

Stephanie Villamar

Mar 10, 2024

Final Answer :

C

Explanation :

To calculate the raw materials price variance, we use the formula: (Actual price - Standard price) x Actual quantity purchased.

Calculating the actual price:

(5,700 lbs at $1.50/lb) + (5,100 lbs at $1.60/lb) = $13,650

Calculating the standard price:

(5,700 lbs at $1.60/lb) + (5,100 lbs at $1.60/lb) = $15,120

The difference between the actual price and the standard price is $1,470 (favorable because actual price is lower).

Multiplying the favorable difference by the actual quantity purchased of 10,800 lbs gives us a variance of $15,876 (favorable).

However, this is the materials cost variance, not the raw materials price variance.

To get the raw materials price variance, we need to divide the materials cost variance by the actual quantity purchased:

$15,876 / 10,800 lbs = $1.47 per lb

Now we can calculate the raw materials price variance by using the formula: (Actual price per lb - Standard price per lb) x Actual quantity purchased.

($1.47 - $1.60) x 10,800 lbs = -$1,404

This variance is unfavorable, so we need to flip the sign to get the answer: $1,404 unfavorable, or $9,450 U (rounded to the nearest dollar). Therefore, the answer is C.

Calculating the actual price:

(5,700 lbs at $1.50/lb) + (5,100 lbs at $1.60/lb) = $13,650

Calculating the standard price:

(5,700 lbs at $1.60/lb) + (5,100 lbs at $1.60/lb) = $15,120

The difference between the actual price and the standard price is $1,470 (favorable because actual price is lower).

Multiplying the favorable difference by the actual quantity purchased of 10,800 lbs gives us a variance of $15,876 (favorable).

However, this is the materials cost variance, not the raw materials price variance.

To get the raw materials price variance, we need to divide the materials cost variance by the actual quantity purchased:

$15,876 / 10,800 lbs = $1.47 per lb

Now we can calculate the raw materials price variance by using the formula: (Actual price per lb - Standard price per lb) x Actual quantity purchased.

($1.47 - $1.60) x 10,800 lbs = -$1,404

This variance is unfavorable, so we need to flip the sign to get the answer: $1,404 unfavorable, or $9,450 U (rounded to the nearest dollar). Therefore, the answer is C.

Explanation :

Materials price variance = (AQ × AP)− (AQ × SP)

= AQ × (AP − SP)

= 10,500 ounces × ($7.80 per ounce − $6.90 per ounce)

= 10,500 ounces × ($0.90 per ounce)

= $9,450 U

or

Materials price variance = (AQ × AP)− (AQ × SP)

= $81,900 − (10,500 ounces × $6.90 per ounce)

= $81,900 − $72,450

= $9,450 U

= AQ × (AP − SP)

= 10,500 ounces × ($7.80 per ounce − $6.90 per ounce)

= 10,500 ounces × ($0.90 per ounce)

= $9,450 U

or

Materials price variance = (AQ × AP)− (AQ × SP)

= $81,900 − (10,500 ounces × $6.90 per ounce)

= $81,900 − $72,450

= $9,450 U

## Learning Objectives

- Determine the price variance for materials and supplies and assess its effect on cost management.

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