Johnston Manufacturing Company purchased 14,000 switches to make 6,000 units.The standard allows for 2 switches per unit.The company actually used 14,500 to produce the 6,000 units.Johnston budgeted $0.75 per switch but had to pay $0.80 per switch.What is Johnston's direct materials price variance for the period?

Question

Quizplus · Accepted Answer

1. Calculate the standard quantity of switches:
6,000 units x 2 switches per unit = 12,000 switches

2. Calculate the standard cost of switches:
12,000 switches x $0.75 per switch = $9,000

3. Calculate the actual cost of switches:
14,500 switches x $0.80 per switch = $11,600

4. Calculate the direct materials price variance:
Actual cost - Standard cost
$11,600 - $9,000 = $2,600 unfavorable
$2,600 unfavorable / 14,500 switches = $0.1793 unfavorable per switch

Rounding to the nearest cent, the direct materials price variance is $0.18 unfavorable per switch.

Since Johnston purchased 14,000 switches, the total direct materials price variance is:

14,000 switches x $0.18 unfavorable per switch = $2,520 unfavorable

Therefore, the best choice is C, $700 unfavorable.

Johnston Manufacturing Company Purchased 14,000 Switches to Make 6,000 Units