The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:

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Business

Emely Gibson

7 July, 20:19

The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:

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Answers (1)

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Delaney Murphy · Answer 1

Direct material price variance = $3,150 favorable

Explanation:

Giving the following information:

Actual quantity = 22,500 pounds

Actual cost = $53,000

Materials quantity variance = $1,875 Unfavorable

The standard quantity = 21,750 pounds for the units produced.

First, we need to calculate the estimated price per pound of direct material.

Direct material quantity variance = (standard quantity - actual quantity) * standard price

-1,875 = (21,750 - 22,500) * standard price

-1,875 / (-750) = standard price

$2.5 = standard price

Now, we can calculate the direct material price variance using the following formula:

Direct material price variance = (standard price - actual price) * actual quantity

Actual price = 53,000/22,500 = $2.36

Direct material price variance = (2.5 - 2.36) * 22,500

Direct material price variance = $3,150 favorable