Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape:

$\begin{array}{lr}
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35 \
\end{array}$

At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and the standard for variable overhead is $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
What is the material price variance for 2017?
A)$4,875 unfavorable
B)$13,750 favorable
C)$13,313 favorable
D)$8,875 favorable

Question

Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape:

$\begin{array}{lr}
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35 \
\end{array}$

At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and the standard for variable overhead is $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
What is the material price variance for 2017?
A)$4,875 unfavorable
B)$13,750 favorable
C)$13,313 favorable
D)$8,875 favorable

Quizplus · Accepted Answer

The material price variance is calculated as (Actual Quantity Purchased * Actual Price) - (Actual Quantity Purchased * Standard Price). The actual quantity purchased is 275,000 ounces, the actual price is $343,750 / 275,000 = $1.25 per ounce, and the standard price is $1.30 per ounce. Thus, the variance is (275,000 * $1.25) - (275,000 * $1.30) = $343,750 - $357,500 = -$13,750, which is favorable because the actual cost is less than the standard cost.

Scotch Brand Products Produces Packaging Tape and Has Determined the Following