Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an average wage of $35.75 per hour.
The direct material price variance during June is ________.
A) $115,000 unfavorable
B) $500,000 favorable
C) $500,000 unfavorable
D) $13,125 favorable

Question

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an average wage of $35.75 per hour.
The direct material price variance during June is ________.
A) $115,000 unfavorable 
B) $500,000 favorable 
C) $500,000 unfavorable 
D) $13,125 favorable

Quizplus · Accepted Answer

Direct material price variance = 23,000 × ($75 - $70) = $115,000 U