Education Products Company gathered the following information for Job #155:
$$\begin{array} { | l | l | l | }
\hline & \text { Standard Total Cost } & \text { Actual Total Cost } \
\hline \text { Direct materials: } & & \
\hline \text { Standard: } 1,000 \text { pints at } \$ 5 / \text { pint } & \$ 5,000 & \
\hline \text { Actual: } 1,160 \text { pints at } \$ 6 / \text { pint } & & \$ 6,960 \
\hline \text { Direct labor: } & & \
\hline \text { Standard: } 500 \text { hours at } \$ 7.50 / \mathrm { hr } & \$ 3,750 & \
\hline \text { Actual: } 480 \text { hours at } \$ 7.25 / \mathrm { hr } . & & \$ 3,480 \
\hline
\end{array}$$ What is the direct materials price variance?
A) $800 unfavorable
B) $1,960 favorable
C) $960 favorable
D) $1,160 unfavorable

Question

Education Products Company gathered the following information for Job #155:
$$\begin{array} { | l | l | l | } 
\hline & \text { Standard Total Cost } & \text { Actual Total Cost } \
\hline \text { Direct materials: } & & \
\hline \text { Standard: } 1,000 \text { pints at } \$ 5 / \text { pint } & \$ 5,000 & \
\hline \text { Actual: } 1,160 \text { pints at } \$ 6 / \text { pint } & & \$ 6,960 \
\hline \text { Direct labor: } & & \
\hline \text { Standard: } 500 \text { hours at } \$ 7.50 / \mathrm { hr } & \$ 3,750 & \
\hline \text { Actual: } 480 \text { hours at } \$ 7.25 / \mathrm { hr } . & & \$ 3,480 \
\hline
\end{array}$$ What is the direct materials price variance?
A) $800 unfavorable
B) $1,960 favorable
C) $960 favorable
D) $1,160 unfavorable

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) * Actual Quantity. Here, the actual price is $6/pint, the standard price is $5/pint, and the actual quantity is 1,160 pints. So, the variance is ($6 - $5) * 1,160 = $1,160 unfavorable. However, since the question asks for the price variance specifically, the calculation should be focused on the price difference per unit, which is $1 more than the standard, multiplied by the actual quantity used. This results in a $1,160 unfavorable variance because the actual price per unit is higher than the standard price, leading to additional costs.

Education Products Company Gathered the Following Information for Job #155