Gilder Corporation makes a product with the following standard costs: Standard Q

Question

Gilder Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 7.90 grams $10.00 per gram $79.00 Direct labor 0.15 hours $28.00 per hour $ 4.20 Variable overhead 0.15 hours $ 8.00 per hour $ 1.20 The company reported the following results concerning this product in June: Originally budgeted output 4,800 units Actual output 5,040 units Raw materials used in production 37,492 grams Purchases of raw materials 41,792 grams Actual direct labor-hours 670 hours Actual cost of raw materials purchases $392,840 Actual direct labor cost $18,164 Actual variable overhead cost $3,028 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 June is:

$25,080 F

$25,080 U

$24,850 U

$24,850 F

Explanation / Answer

Solution :

Materials price variance for June = Actual Quantity ( *Actual price - Standard price)

= 41,792 ( 9.4 - 10 )

= $ 25,080 F

* Actual Price = $392,840 / 41792 = 9.4

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