Moreland Manufacturing Inc. Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000 faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland's direct materials price variance is:

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $.40 per ounce, and the actual price is $.39 per ounce. The actual quantity is 106,050 ounces. Thus, the variance is ($.39 - $.40) x 106,050 = -$1,060.50, which is favorable (F) because the actual price is less than the standard price.