A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:
A) $120 favorable.
B) $520 unfavorable.
C) $400 favorable.
D) $520 favorable.
E) $400 unfavorable.

Question

Quizplus · Accepted Answer

The standard cost of material J is $2 per pound, and the actual cost is $9,880 / 5,200 pounds = $1.90 per pound. The difference between the standard cost and the actual cost is $2 - $1.90 = $0.10 per pound. The total variance is $0.10 per pound * 5,200 pounds = $520 favorable.

A Company Has Established 5 Pounds of Material J at $2