Question

A company uses the following standard costs to produce a single unit of output.

Direct materials	7 pounds at $0.80 per pound	=	$	5.60
Direct labor	0.6 hour at $10.00 per hour	=	$	6.00
Manufacturing overhead	0.6 hour at $4.20 per hour	=	$	2.52

During the latest month, the company purchased and used 67,000 pounds of direct materials at a price of $1.10 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $54,340 based on 5,720 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $22,200 and fixed manufacturing overhead incurred was $13,000. Based on this information, the total direct materials cost variance for the month was:

• A. $17,700 unfavorable

• B. $17,700 favorable

• C. $20,100 favorable

• D. $20,100 unfavorable

• E. $2,400 favorable

Answer 1

Answer : A =$ 17,700 Unfavorable

===>> Standard Quantity = 10,000 * 7 = 70,000 pounds.

===>> Standard price = $ 0.80.

===>> Actual Quantity = 67,000 pounds.

===>> Actual price = $ 1.10.

>> Total Material cost variance = ( Standard quantity * Standard price ) - ( Actual quantity * Actual price ).

>> Total Material Cost Variance = ( 70,000 * $ 0.80 ) - ( 67,000 * $ 1.1 ) .

>> Total Material Cost Variance = $ 17,700 Unfavorable