Oxford Co.has a materials standard of 2.1 pounds per unit of output.Each pound has a standard price of $10 per pound.During February,Oxford Co.paid $57,220 for 4,840 pounds,which were used to produce 2,400 units.What is the direct materials price variance?
A)$6,820 unfavorable
B)$8,820 unfavorable
C)$8,820 favorable
D)$6,820 favorable

Question

Quizplus · Accepted Answer

First, let's calculate the actual cost per pound:
Actual cost per pound = Total cost / Total pounds used
Actual cost per pound = $57,220 / 4,840
Actual cost per pound = $11.81 per pound

Next, let's calculate the actual pounds used:
Actual pounds used = Units produced * Materials standard
Actual pounds used = 2,400 * 2.1
Actual pounds used = 5,040 pounds

Now we can calculate the total actual cost of materials used:
Total actual cost = Actual cost per pound * Actual pounds used
Total actual cost = $11.81 * 5,040
Total actual cost = $59,498.40

Finally, let's calculate the direct materials price variance:
Direct materials price variance = (Standard price - Actual price) * Actual pounds used
Direct materials price variance = ($10 - $11.81) * 5,040
Direct materials price variance = $-1.81 * 5,040
Direct materials price variance = $-9,104.40

Since the actual price per pound was higher than the standard price, the variance is unfavorable. The answer is B) $8,820 unfavorable.

Oxford CoHas a Materials Standard of 2