Ravena Labs., Incorporated makes a single product which has the following standards:Direct materials: 2.5 ounces at $20 per ounceDirect labor: 1.4 hours at $12.50 per hourVariable manufacturing overhead: 1.4 hours at 3.50 per hourVariable manufacturing overhead is applied on the basis of standard direct labor-hours. The following data are available for October:3,750 units of compound were produced during the month.There was no beginning direct materials inventory.Direct materials purchased: 12,000 ounces for $225,000.The ending direct materials inventory was 2,000 ounces.Direct labor-hours worked: 5,600 hours at a cost of $67,200.Variable manufacturing overhead costs incurred amounted to $18,200.Variable manufacturing overhead applied to products: $18,375.The materials price variance for October is:
A) $15,000 Unfavorable
B) $15,000 Favorable
C) $25,000 Unfavorable
D) $25,000 Favorable

Question

Quizplus · Accepted Answer

To calculate the materials price variance, we use the formula:

Materials price variance = (actual price - standard price) x actual quantity

Actual quantity = Direct materials purchased - Ending direct materials inventory
Actual quantity = 12,000 - 2,000
Actual quantity = 10,000 ounces

Standard price = $20 per ounce
Actual price = $225,000 / 12,000 = $18.75 per ounce

Materials price variance = ($18.75 - $20) x 10,000
Materials price variance = $15,000 favorable