Question 8 Milar Corporation makes a product with the following standard costs:

Question

Question 8

Milar Corporation makes a product with the following standard costs:

In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for January is:

$1,690 U

$1,540 F

$1,540 U

$1,690 F

Standard Quantity or Hours Standard Price or Rate Direct materials 7.7 pounds $ 4.00 per pound Direct labor 0.1 hours $ 20.00 per hour Variable overhead 0.1 hours $ 4.00 per hour

Explanation / Answer

material price variance = ( AQ * AP ) - ( AQ * SP )

65910 - ( 16900 * 4) =

65910 - 67600 = 1690 F

so answer is $1690F

actual cost did not exceed the standard cost so its favourable

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