The Costmore Company uses standard costing and has established the following standards for direc materials and direct labor for each unit it makes:
$\begin{array}{ll}
\text { Direct Materials } & 3 \text { gallons at } \$ 5 \text { per gallon } \
\text { Direct Labor } & 1 \text { hour at } \$ 12 \text { per hour }
\end{array}$
During July, the company made 4,000 units of product and used 13,000 gallons. The actual price paid for materials was $5.20 per gallon.
Direct Labor used was 3,600 hours and workers were paid $11.75 per hour.
An analysis would indicate

Question

Quizplus · Accepted Answer

DThe materials quantity variance is calculated as (Actual Quantity - Standard Quantity) * Standard Price. The standard quantity for 4,000 units is 4,000 units * 3 gallons/unit = 12,000 gallons. The actual quantity used is 13,000 gallons. Therefore, the materials quantity variance is (13,000 gallons - 12,000 gallons) * $5/gallon = 1,000 gallons * $5/gallon = $5,000 unfavorable, because more materials were used than expected.The materials price variance is calculated as (Actual Price - Standard Price) * Actual Quantity. The actual price is $5.20/gallon and the standard price is $5/gallon. Therefore, the materials price variance is ($5.20/gallon - $5/gallon) * 13,000 gallons = $0.20/gallon * 13,000 gallons = $2,600 unfavorable, but since the options do not match this calculation, it seems there was a misunderstanding in the question's options regarding the materials price variance. The correct interpretation based on the provided options focuses on the quantity variance and the overall unfavorable outcome due to increased costs, which aligns with option C for the quantity variance and suggests a misunderstanding for the price variance, which was not directly addressed in the options.

The Costmore Company Uses Standard Costing and Has Established the Following