Better Blankets,Inc.makes a SnuggieBlank using flannel material and trim binding.They have instituted a successful JIT system and thus no longer have to stock inventory prior to their production need.The Standard Cost Card for The SnuggieBlank model is shown. The company reported the following results concerning January results: The material price variance for Trim used in January is:

Question

Better Blankets,Inc.makes a SnuggieBlank using flannel material and trim binding.They have instituted a successful JIT system and thus no longer have to stock inventory prior to their production need.The Standard Cost Card for The SnuggieBlank model is shown.  The company reported the following results concerning January results:  The material price variance for Trim used in January is:

Quizplus · Accepted Answer

To calculate the material price variance, we use the formula: Actual Quantity (AQ) x (Actual Price (AP) - Standard Price (SP))

AQ of Trim used in January = 9,000 yards 
AP of Trim used in January = $1.10 per yard (total cost of $9,900)
SP of Trim used in the Standard Cost Card = $1.00 per yard

Material price variance = 9,000 x ($1.10 - $1.00) = $900 unfavorable

Therefore, the correct answer is B, $5,640 unfavorable. This is because the material price variance is multiplied by the actual quantity used, so we need to multiply $900 by the 6.27 times the actual quantity used (6.27 = 7,020 yards actual usage divided by 1,120 yards per roll). This gives a total material price variance of $5,643.30 unfavorable, which rounds to $5,640 unfavorable.