Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company

Question

Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

Direct material.............standard quantity 20 pounds/standard cost per bag $8.00
Direct labor................standard quantity hours 0.1 hrs./standard cost per bag $1.10
Variable overhead.........standard quantity 0.1 hrs./standard cost per bag $0.40

The company had no beginning inventories of any kind on Jan. 1. Variable overhead is applied to production on the basis of standard direct labor-hours. During January, the following activity was recorded by the company:

• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on Jan. 31: 3,000 pounds

The materials price variance for January is:




a. $1,640 F b. $1,640 U c. $1,700 F d. $1,300 U

Explanation / Answer

C) 1700 F

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