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

$

FavorableNot ApplicableUnfavorable

Answer 1

Actual quantity of material purchased = 1,100 ounces

Actual cost of material used = $869,000

Hence, actual price of material = Actual cost of material used/Actual quantity of material purchased
= 869,000/1,100
= $790 per ounce

Standard price = $800 per ounce

Direct material price variance = Actual quantity x (Standard price - Actual price)
= 1,000 x (800 - 790)
= $10,000 (Favorable)

Direct material price variance

$10,000

Favorable

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