QUESTION 17 The Peach Company uses standard costing and has established the foll

Question

QUESTION 17 The Peach Company uses standard costing and has established the following standards for its single product: Direct materials: 2 gallons at $3 per gallon Direct labor: 0.5 hours at $8 per hour Variable overhead: 0.5 hours at $2 per hour During December, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.10 per gallon Direct materials used: 7,600 gallons Direct labor used: 2,200 hours at $8.25 per hour Actual variable overhead: $4,175 The company applies variable overhead to products on the basis of standard direct labor-hours. The materials price variance for December was B. $2,310 F C.$810 u D.$810F E.$1,620 F

Explanation / Answer

Answer : C) $810(U)

The material price variance = actual quantity(actual price – standard price)

       material price variance =AQ(AP-SP)

                                             =$8,100(3.10per gallon-3.0 per gallon)

                                             = $8,100(0.10)

                                              =$810(U)

   The material price variance for December =$810(U)

  

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