The DeShannon Company produces a product that requires 4 kilograms of raw materi

Question

The DeShannon Company produces a product that requires 4 kilograms of raw materials at a cost of $10 per kilogram (at standard). Data for the previous month are as follows:

Units produced

4321

Kilograms of raw materials purchased

21174

Kilograms of raw materials used

16136

Actual cost per kilogram

$9

What is the direct materials price variance? Note that a negative number indicates an unfavourable variance.

The DeShannon Company produces a product that requires 4 kilograms of raw materials at a cost of $10 per kilogram (at standard). Data for the previous month are as follows:

Units produced

4321

Kilograms of raw materials purchased

21174

Kilograms of raw materials used

16136

Actual cost per kilogram

$9

What is the direct materials price variance? Note that a negative number indicates an unfavourable variance.

Explanation / Answer

Material price variance = (Standard price-actual price)actual quantity

                                  = (10-9)*21174

Material price variance = 21174 Favourable

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