Question

James received a report from the production and purchasing departments with the following values for January: Actual materials quantity: 90,000 pounds Total actual cost: $47,200 Standard materials quantity: 5.5 pounds/unit Standard price: $0.55/pound Units made: 16,300 Two days later, he got a correction report from the purchasing department that they found another invoice for $6,200. How much would James’ materials price variance change for the month of January?
A : $3,900 F
B : $3,900 U
C : $6,200 U
D : $6,200 F

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

Actual materials quantity: 90,000 pounds

Total actual cost: $47,200 + 6,200= $53,400

Standard materials quantity: 5.5 pounds/unit

Standard price: $0.55/pound

Units made: 16,300

We need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (0.55 + 53,400/90,000)*90,000= $3,900 unfavorable