Question

Sheridan Gold manufactures award medals. In August, Sheridan produced 6,100 medals, 100 more than expected. During the month, the company purchased 1,100 ounces of gold for $869,000. The standard price for the gold is $800 per ounce. The company actually used 1,000 ounces of gold for production.

Calculate Sheridan’s direct materials price variance for the month. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Direct material price variance

$

Answer 1

Direct material price variance = $ 11,000 Favorable

The variance is calculated on material purchased not material used. Al though if material used is taken then answer will be $10,000 Favorable

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$               800.00	-	$                 790.00	)	x	1100
	11000
	Variance		$           11,000.00			Favourable-F

.

Actual DATA for		6100	Items
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	1100	$       790.00*	$       869,000.00

*869000/1100