A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:
A) $6,000 unfavorable
B) $1,800 favorable
C) $1,000 favorable
D) $5,800 unfavorable
E) $1,800 unfavorable

Question

A company uses the following standard costs to produce a single unit of output.  During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:
A) $6,000 unfavorable 
B) $1,800 favorable 
C) $1,000 favorable 
D) $5,800 unfavorable 
E) $1,800 unfavorable

Quizplus · Accepted Answer

DM Price Variance = (Actual Price − Standard Price) × Actual Quantity Purchased
= ($1.00 - $0.90) × 58,000 pounds; $5,800 unfavorable

A Company Uses the Following Standard Costs to Produce a Single