The Alpha Company produces toys for national distribution. Standards for a particular toy are:
Materials: 12 ounces per unit at 56¢ per ounce.
Labor: 2 hours per unit at $2.75 per hour.
During the month of December, the company produced 1,000 units. Information for the month follows:
Materials: 14,000 ounces were purchased and used at a total cost of $7,140.
Labor: 2,500 hours worked at a total cost of $8,000.
-The materials price variance is:
A) $700 U
B) $420 U
C) $420 F
D) $700 F

Question

Quizplus · Accepted Answer

The materials price variance is unfavorable because the actual price paid for materials was higher than the standard price. The variance is calculated as follows:Actual price - Standard price = Variance$7,140 - $6,720 = $420 F

The Alpha Company Produces Toys for National Distribution