Question

Streetsboro Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that​ month, 87,500 pounds of clay were purchased and used at the total cost of $ 168,000. Calculate the direct materials price variation.

Answer 1

Direct material price variance= $3,500 favorable

Step-by-step explanation:

Giving the following information:

The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that​ month, 87,500 pounds of clay were purchased and used at the total cost of $ 168,000.

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (1.96 - 168,000/87,500)*87,500= 3,500 favorable