Question

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

Direct materials standard (3 lbs @ $2/lb)	$6	per finished unit
Total direct materials cost variance—unfavorable	$14,250
Actual direct materials used	100,000	lbs.
Actual finished units produced	25,000	units

• $35,750 unfavorable.

• $35,750 favorable.

• $45,750 favorable.

• $14,250 unfavorable.

• $50,000 unfavorable.

Answer 1

$35,750 favorable.

Step-1:Calculation of actual price of material
Total direct material cost variance		=	Standard cost of material	-	Actual cost of material
$       14,250	Unfavorable	=	(25000*$6)	-	(100000*Actual material price)
$       14,250	Unfavorable	=	1,50,000	-	(100000*Actual material price)
(100000*Actual material price)		=	1,50,000	+	$ 14,250
(100000*Actual material price)		=	1,64,250
Actual material price		=	$        1.6425
Step-2:Calculation of direct material price variance
Direct Material price variance		=	(Standard price - Actual Price)*Actual quantity of material
		=	(2.00-1.6425)*100000
		=	$        35,750	Favorable