Question

For the year 2018, a company provides the following information: Amount 4,000 30,000 Description Budgeted output Budgeted raw materials to be used in pounds) Budgeted raw materials price per pound Budgeted labor rate per hour Budgeted labor hours $0.20 $15.00 2,000 Actual output Actual raw materials used in pounds) 4,200 32,000 Actual raw materials price per pound Actual labor rate per hour Actual labor hours $0.18 $14.50 2.050 Compute the direct materials price variance. a. The direct materials price variance is $600(Favorable) b. The direct materials price variance is $640(Unfavorable). c. The direct materials price variance is $640(Favorable) d. The direct materials price variance is $600(Unfavorable)

Answer 1

c. The direct materials price variance is $640 (Favorable)

Step-by-step explanation:

Provided, budgeted and actual information we have,

Direct Material Price Variance = (Standard Price - Actual Price)
`*` Actual Quantity.

Given standard price per unit = $0.20

Actual price per unit = $0.18

Actual Quantity = 32,000 pounds

Variance = ($0.20 - $0.18)
`*` 32,000 = $640 Favorable as the actual price is less than budgeted price.