The following information is available for Munter Manufacturing Company.
-- Direct materials price standard is $3.25 per pound.
-- Direct materials quantity standard is six pounds per finished unit.
-- Budgeted production is 25,000 finished units.
-- 175,000 pounds of direct materials were purchased for $525,000.
-- 175,000 pounds of direct materials were used in production.
-- 25,600 finished units of product were produced.
What is the direct materials price variance?
A) $43,750 Unfavorable
B) $43,750 Favorable
C) $350,000 Unfavorable
D) $350,000 Favorable

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The actual price per pound is $525,000 / 175,000 pounds = $3.00. The standard price is $3.25. Therefore, the variance is ($3.00 - $3.25) x 175,000 = -$0.25 x 175,000 = -$43,750, which is favorable because the actual price is less than the standard price.

The Following Information Is Available for Munter Manufacturing Company