Question

the following materials standards have been established for a particular product:
standard quantity per unit of output 4.3 meters
standard price $18.60 per meter
the following data pertain to operations concerning the product for the last month:
actual materials purchased 7,100 meters
actual cost of materials purchased $138,805
actual materials used in production 6,600 meters
actual output 1,500 units
what is the materials price variance for the month?
multiple choice
$12,345 u
$7,600 u
$6,745 u
$2,933 u

Explanation:

Step1: Calculate actual price per meter

Actual price per meter = Actual cost of materials purchased / Actual materials purchased
Actual price per meter = $\frac{138805}{7100}=19.55$ dollars per meter

Step2: Calculate materials price variance

Materials price variance formula: $(Actual\ price - Standard\ price)\times Actual\ quantity\ purchased$
Standard price = $18.60$ dollars per meter, Actual quantity purchased = $7100$ meters
Materials price variance = $(19.55 - 18.60)\times7100$
Materials price variance = $0.95\times7100 = 6745$
Since actual price > standard price, it is unfavorable (U)

Answer:

$6,745\ U$