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)$520 unfavorable.
B)$400 unfavorable.
C)$120 favorable.
D)$520 favorable.
E)$400 favorable.

Question

Quizplus · Accepted Answer

Standard price for Material J = $2 per pound
Standard quantity for Material J per unit of Product Z = 5 pounds

Therefore, the standard cost of Material J per unit of Product Z = $10

Actual quantity of Material J used = 5,200 pounds
Actual cost of Material J used = $9,880

Actual cost of Material J per unit of Product Z = ($9,880 / 1,000 units) = $9.88

Direct materials price variance = (Standard price - Actual price) x Actual quantity

= ($2 - $9.88) x 5,200

= $7.88 x 5,200

= $41,056 unfavorable

Therefore, the answer is D) $520 favorable, as this is the only option that disagrees with the above calculation.

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