Streetsboro Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that month, 87,500 pounds of clay were purchased and used at the total cost of $ 168,000. Calculate the direct materials price variation.

Question

Business

Jason Dudley

11 May, 10:29

Streetsboro Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that month, 87,500 pounds of clay were purchased and used at the total cost of $ 168,000. Calculate the direct materials price variation.

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Abram Hines · Answer 1

Direct material price variance = $3,500 favorable

Explanation:

Giving the following information:

The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that month, 87,500 pounds of clay were purchased and used at the total cost of $ 168,000.

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

Direct material price variance = (1.96 - 168,000/87,500) * 87,500 = 3,500 favorable