Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $1,690 U
B) $1,540 F
C) $1,540 U
D) $1,690 F

Question

Milar Corporation makes a product with the following standard costs:
  In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $1,690 U 
B) $1,540 F 
C) $1,540 U 
D) $1,690 F

Quizplus · Accepted Answer

Materials price variance = (AQ × AP) − (AQ × SP)
= ($65,910) − (16,900 pounds × $4.00 per pound)
= $65,910 − $67,600
= $1,690 F

Milar Corporation Makes a Product with the Following Standard Costs