Fluegge Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for December:
The raw materials price variance for the month is closest to:
A) $15,060 Unfavorable
B) $14,016 Favorable
C) $15,060 Favorable
D) $14,016 Unfavorable

Question

Fluegge Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.  The company has reported the following actual results for the product for December:
 The raw materials price variance for the month is closest to:
A) $15,060 Unfavorable 
B) $14,016 Favorable 
C) $15,060 Favorable 
D) $14,016 Unfavorable

Quizplus · Accepted Answer

Raw Materials Cost Variance can be calculated using the following formula:

Actual Quantity Purchased (AQ) x (Actual Price (AP) - Standard Price (SP))

For the given information,

AQ = 18,000 pounds
AP = $5.20 per pound
SP = $5.60 per pound

Raw Materials Cost Variance = 18,000 x ($5.20 - $5.60) = $15,060 Favorable.

Therefore, the correct answer is C.

Fluegge Incorporated Has Provided the Following Data Concerning One of the Products