Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows:
Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls.
$\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ (012 $ per metre) }&\$10\
\text { Direct labour (3 hours $ @ \$ 6 $ per hour)}&18\\end{array}$

-Refer to the Figure.What is Allan's materials price variance?
A)$30,000 U
B)$30,000 F
C)$31,250 U
D)$31,250 F

Question

Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows:
Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls.
 $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ (012 $ per metre) }&\$10\
\text { Direct labour (3 hours $ @ \$ 6 $ per hour)}&18\\end{array}$

-Refer to the Figure.What is Allan's materials price variance?
A)$30,000 U
B)$30,000 F
C)$31,250 U
D)$31,250 F

Quizplus · Accepted Answer

Materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price per meter is $2, and the actual price is $1.95. The actual quantity used is 600,000 meters. Thus, the variance is ($1.95 - $2) x 600,000 = -$0.05 x 600,000 = -$30,000, indicating a $30,000 favorable variance.

Allan Company Manufactures Overalls -Refer to the Figure