Oceanside Marine Company manufactures special metallic materials and decorative

Question

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:

Direct materials: 2 pound per unit; $12 per pound

Direct labor: 2 hours per unit; $18 per hour

Oceanside produced 2,000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were $98,700.

What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

A. 2320 unfavorable

B. 2320 favorable

C. 8700 Unfavorable

D. 8700 Favorable

Explanation / Answer

Direct material cost variance = (Standard Rate-actual rate)Actual quantity

= (12*7500-98700)

Direct material cost variance = 8700 Unfavorable

so answer is c) 8700 unfavorable

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