Question

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product. Standard Quantity Standard Price or Rate Standard Cost Direct materials 5 pounds $3.60 per pound $18.00 Direct labor 1.25 hours $12.00 per hour $15.00During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours. The price variance for the direct material acquired by Jackson Industries during May is:

$21,600 Favorable

$28,000 Favorable

$21,600 Unfavorable

$25,000 Unfavorable

Answer 1

Correct answer----------$25000 unfavorable

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    3.60	-	$                     3.80	)	x	125000
	-25000
	Variance		$           25,000.00			Unfavourable-U

Standard DATA for		22000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 5 Ounces x 22000 Units)=110000 Ounces	$                  3.60	$    3,96,000.00

Actual DATA for		22000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	125000	$            3.80	$               4,75,000.00