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A dress company has the following standards to make one dress: Standard Quantity, Standard Price;...

Question:

A dress company has the following standards to make one dress:

Standard Quantity Standard Price
Direct materials 3 yards per unit $6.50 per yard
Direct labor 1.5 hours per unit $8.00 per hour

The company purchased 3,000 yards of material in March for $21,000. The company used 2,800 yards in March in order to make 7,700 dresses. The direct materials price variance is:

A. $1,400 unfavorable

B. $1,500 unfavorable

C. $1,400 favorable

D. $1,500 favorable

Direct material price variance:

Direct material price variance measures the difference between the actual price and the standard price of the actual purchase quantity of direct material to be used in any activity. Also known by the names direct material rate variance and purchase price variance, the formula for this variance is (actual cost - standard cost) multiplied by actual quantity.

Answer and Explanation:

The formula for direct material price variance = (actual cost - standard cost) multiplied by actual quantity = AQ x (AP - SP)

3,000 yards were...

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Calculating Direct Materials & Direct Labor Variances

from Accounting 301: Applied Managerial Accounting

Chapter 13 / Lesson 3
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