Question

Oddo Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	2.0 ounces	$6.00 per ounce	$12.00
Direct labor	0.6 hours	$12.00 per hour	$7.20
Variable overhead	0.6 hours	$4.50 per hour	$2.70

The company reported the following results concerning this product in December.

Originally budgeted output	6,400	units
Actual output	6,200	units
Raw materials used in production	9,600	ounces
Actual direct labor-hours	3,920	hours
Purchases of raw materials	11,200	ounces
Actual price of raw materials	5.75	per ounce
Actual direct labor rate	11.20	per hour
Actual variable overhead rate	4.20	per hour

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for December is:

$19,200 U

$19,200 F

$2,800 F

$2,800 U

Answer 1

Materials Price Variance = (Standard price - Actual price) *Actual quantity

= (6 - 5.75) * 11,200

= 2800 F

Option C is the answer