Question

A company produces a single product called a widget and provides the following information for the...

A company produces a single product called a widget and provides the following information for the month of May about one of the materials used to make the product:

  • Pounds of material purchased: 9,800
  • Pounds of material used: 8,700
  • Total cost of material purchased: $20,384
  • Standard material cost: $2.11/pound
  • Standard material quantity: 6 pounds per widget
  • Number of widgets produced: 1600

What is the materials price variance?

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Answer #1

Actual quantity of material used = 8,700 pounds

Actual quantity of material purchased = 9,800 pounds

Actual cost of material purchased = $20,384

Hence, actual price of material = Actual cost of material purchased/Actual quantity of material purchased
= 20,384/9,800
= $2.08 per pound

Standard price = $2.11 per pound

Standard quantity = 6 pounds per widget

Actual output = 1,600 widgets

Hence, standard quantity for actual output = 1,600 x 6
= 9,600 pounds


Direct material price variance = Actual quantity x (Standard price - Actual price)
= 8,700 x (2.11 – 2.08)
= $261 (Favorable)

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