Question

# Georgia, Inc. has collected the following data on one of its products. The direct materials price...

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

Direct materials standard (2 lbs @ \$2/lb) \$4 per finished unit
Total direct materials cost variance—unfavorable \$17,750
Actual direct materials used 60,000 lbs.
Actual finished units produced 20,000 units

 Unfavorable variance is shown as a positive number Standard quantity for actual production = Actual production * Standard quantity per unit = 20000 * 2 = 40000 Total direct materials cost variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price ) 17750 = ( Actual quantity * Actual price ) - ( 40000 * 2 ) 17750 = ( Actual quantity * Actual price ) - 80000 ( Actual quantity * Actual price ) = 17750 + 80000 = 97750 Direct materials price variance = ( Actual quantity * Actual price ) - ( Actual quanatity - Standard price ) Direct materials price variance = 97750 - ( 60000 * 2 ) = -22250 Favorable

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