Question

Consider the following information for Dave Company for the month of May:
Direct materials (DM) purchased and used							72,000	gallons
Total quantity of DM budgeted to be used in May production							68,800	gallons
Actual cost of DM purchased and used in May							$152,800
Unfavorable DM quantity variance							$7,200
What is the DM price variance in May?

	A.	$2,000 Unfavorable
	B.	$2,000 Favorable
	C.	$9,200 Unfavorable
	D.	$9,200 Favorable
	E.	$7,200 Unfavorable

Answer 1

Ans:D $9,200 Favorable is Correct Answer

Explanation:

Direct material quantity varaince = (Actual quantity * Standard price) - (Standard quantity * Standard price)

$7,200 = (72,000* Standard price) - (68,800* Standard price)

$7,200 = Standard price * (72,000 - 68,800)

Standard price = $2.25

Direct material price varaince = (Actual quantity * Actual price) - (Actual quantity * Standard price)

= $152,800 - (72,000 * $2.25)

= $9,200 Favorable

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