Miguez Corporation makes a product with the following standard costs:
The company budgeted for production of 2,600 units in September, but actual production was 2,500 units. The company used 5,440 liters of direct material and 1,680 direct labor-hours to produce this output. The company purchased 5,800 liters of the direct material at $7.20 per liter. The actual direct labor rate was $24.10 per hour and the actual variable overhead rate was $1.90 per hour.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The materials price variance for September is:
A) $1,150 U
B) $1,150 F
C) $1,160 F
D) $1,160 U

Question

Miguez Corporation makes a product with the following standard costs:
  The company budgeted for production of 2,600 units in September, but actual production was 2,500 units. The company used 5,440 liters of direct material and 1,680 direct labor-hours to produce this output. The company purchased 5,800 liters of the direct material at $7.20 per liter. The actual direct labor rate was $24.10 per hour and the actual variable overhead rate was $1.90 per hour.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The materials price variance for September is:
A) $1,150 U 
B) $1,150 F 
C) $1,160 F 
D) $1,160 U

Quizplus · Accepted Answer

Materials price variance = AQ × (AP − SP)
= 5,800 liters × ($7.20 per liter − $7.00 per liter)
= 5,800 liters × ($0.20 per liter)
= $1,160 U

Miguez Corporation Makes a Product with the Following Standard Costs