Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton's direct materials price variance is:
A) $195 U.
B) $ 15 U.
C) $185 F.
D) $180 F.

Question

Quizplus · Accepted Answer

Direct materials price variance = (Standard price - Actual price) x Actual quantity purchased and used

Standard price = $4.00 per yard
Actual price = $3.90 per yard
Actual quantity purchased and used = 1,850 yards

Direct materials price variance = ($4.00 - $3.90) x 1,850 = $185 F

Therefore, the direct materials price variance is $185 F (Choice C).

Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags