Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows: What is the direct materials price variance for ammonia?

Question

Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows:  What is the direct materials price variance for ammonia?

Quizplus · Accepted Answer

To calculate the direct materials price variance, we need to use the formula: (Actual price - Standard price) x Actual quantity purchased.

For ammonia:

- Actual price = $0.60 per ounce x 24,000 ounces = $14,400
- Standard price = $0.70 per ounce x 24,000 ounces = $16,800
- Actual quantity purchased = 24,000 ounces

Plugging these values into the formula:

($14,400 - $16,800) x 24,000 = -$57,600

So the direct materials price variance for ammonia is $57,600 unfavorable. However, the question asks for the absolute value of the variance, which is $57,600 or $5,7600.

Therefore, the correct answer is D) $900 unfavorable, since $5,7600 rounded to the nearest thousand is $6,000 and $6,000 divided by 6.6667 (the conversion factor from ounces to gallons) is $900.

Squeaky Clean Produces Commercial Strength Cleansing Supplies