Madden Corporation manufactures tminus- shirts, which is its only product. The standards for tminus-shirts are as follows: Standard direct materials cost per yard $ 8 Standard direct materials quantity per tminus-shirt (yards) 1.5 During the month of May, the company produced 1,250 tminus-shirts. Related production data for the month follows: Actual yards of direct material purchased 1,400 Actual direct materials total cost $ 15,500 What is the direct materials price variance for the month? A. $4,300 unfavorable B. $3,800 favorable C. $4,300 favorable D. $3,800 unfavorable

Question

Business

Ximena Roman

23 December, 07:35

Madden Corporation manufactures tminus- shirts, which is its only product. The standards for tminus-shirts are as follows: Standard direct materials cost per yard $ 8 Standard direct materials quantity per tminus-shirt (yards) 1.5 During the month of May, the company produced 1,250 tminus-shirts. Related production data for the month follows: Actual yards of direct material purchased 1,400 Actual direct materials total cost $ 15,500 What is the direct materials price variance for the month? A. $4,300 unfavorable B. $3,800 favorable C. $4,300 favorable D. $3,800 unfavorable

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Answers (1)

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Roberson · Answer 1

The correct option is A

Explanation:

The direct materials price variance for the month is computed as:

Direct Material Price Variance = [Actual yards of direct material purchased * (Actual direct materials total cost / Actual yards of direct material purchased) - Standard direct materials cost per yard]

Direct Material Price Variance = [1,400 * ($15,500 / 1,400) - $8]

= [1,400 * ($11.0714 - $8) ]

= 1,400 * $3.0714

= $4,300

It is unfavourable as the Actual Price is more than the standard price.

Therefore, the correct answer is $4,300 unfavourable which is option A.