Question

Kennedy Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost per Unit Direct materials 8.2 pounds $7.00 per pound $57.40 Direct labor 0.4 hours $20.00 per hour $8.00 Variable overhead 0.4 hours $2.00 per hour $0.80 The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 23,000 pounds of the direct material at $7.99 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour. 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 June is: Select one: a. $22,770.00 b. $19,651.50 c. $26,252.86 d. $22,657.36

Answer 1

Materials price variance = Quantity purchased*(Actual price-Standard price)

Materials price variance = 23000*(7.99-7.00)= $22,770.00 Unfavorable

Option A $22,770.00 is correct