Question

Landram Corporation makes a product with the following standard costs: Direct materials Direct labor Variable overhead Standard Quantity or Hours 2.0 kilos 1.7 hours 1.7 hours Standard Price or Rate $7.00 per kilo $13.00 per hour $7.00 per hour in March the company produced 4.700 units using 10,350 kilos of the direct material and 2,330 directllabor- hours. During the month, the company purchased 10,920 kilos of the direct material at a cost of $76,800. The actual direct labor cost was $38,245 and the actual variable overhead cost was $11.946 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for March is O 5220 U 0 $360 F O 5360 U O $220 2019 McGraw-Hit Education

Answer 1

Material Price Variance = $360 U

Explanation -

Actual Price = Direct Material Purchased/ Purchased Quantity
                    = 76800/10920
                   = $ 7.03296
Actual Quantity = 10350 Kilos

Standard Price = $7

Material Price Variance = (Actual Price - Standard Price) x Actual Quantity
                                    = (7.03296 - 7) x 10350

                                   = $341

As actual price is greater than standard price, Material Price Variance is unfavorable and it is nearest to $360U

hence, Material Price Variance = $360 U