The Reindeer Company makes mugs for which the following standards have been developed: $\begin{array}{cc}
&\text { Standard Inputs } & \text { Standard Frice } \
&\text { Expected for Each } & \text { Expected per } \
&\text { Unit of Output } & \text { Unit of Output }\\hline
\text { Direct materials } & 5 \text { ounces } & \$ 2 \text { per ounce } \
\text { Direct labor } & 1.5 \text { hours } & \$ 8 \text { per hour }
\end{array}$ Production of 400 mugs was expected in July, but 440 mugs were actually completed. Direct materials purchased and used were 2,100 ounces at an actual price of $2.30 per ounce.Direct-labor cost for the month was $5,310, and the actual pay per hour was $9.00._____ is the direct-material price variance for July.
A)$630 unfavorable
B)$630 favorable
C)$400 unfavorable
D)$400 favorable

Question

Quizplus · Accepted Answer

The direct-material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $2 per ounce, the actual price is $2.30 per ounce, and the actual quantity used is 2,100 ounces. Thus, the variance is (2.30 - 2) x 2,100 = 0.30 x 2,100 = $630 unfavorable.

The Reindeer Company Makes Mugs for Which the Following Standards