Question

Exeter has a materials standard of 1 pound per unit of output. Each pound has a...

Exeter has a materials standard of 1 pound per unit of output. Each pound has a standard price of $24 per pound. During July, Exeter paid $135,000 for 5,020 pounds, which it used to produce 4,740 units. What is the direct materials price variance?

  • $21,240 unfavorable

  • $13,620 favorable

  • $34,860 unfavorable

  • $14,520 unfavorable

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Answer #1
Answer:
Materials Price Variance
           =    (Actual Quantity x Standard Price] (-) [ Actual Quantity x Actual price )
           =      ( 5,020 x $ 24 )   (-) ( 5,020 x   $ 135,000 / 5,020 )  
           =      $ 120,480 (-) $ 135,000
           =      $ 14,520   (unfavorable)
Materials Price Variance    =      $ 14,520   (unfavorable)
Option (d) is Correct
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