Question

27

Hurren Corporation makes a product with the following standard costs: Standard Cost Standard Quantity or Standard Price or Per Unit Rate Hours $22.40 $4.00 per gram 5.6 grams Direct materials $36.10 $19.00 per hour 1,9 hours Direct labor $7.60 $4.00 per hour 1.9 hours Varlable overhead The company reported the following results concerning this product in June. Originally budgeted output 5,400 units Actual output 5,300 units Raw materials used in production 28,500 grams Actual direct labor-hours 5,700 hours Purchases of raw materials 33,000 grams $4.10 Actual price of raw materlals purchased per gram $19.90 per hour Actual direct labor rate Actual variable overhead rate $3.70 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: $3,300 U $2.872 F O $2,872 U $3,300 F

Answer 1

Ans. Option 1st $3,300 U

Calculation and explanation:

Materials price variance = (Standard price - Actual price) * Purchase of raw materials

= ($4.00 - $4.10) * 33,000

= -$0.10 * 33,000

= -$3,300 or $3,300 unfavorable

*As the standard price is less than the actual price so the variance is unfavorable.