Answer:
1. Purchase price variance = $2,490 Favorable
2. Direct Material Usage Variance = $3,000 Unfavorable
Explanation:
Provided information, we have
Standard Material per unit = 7 pounds
Actual Units produced = 800 units
Standard units = 800 7 = 5,600 pounds
Actual units = 6,000 pounds
Standard Price per pound = $7.50
Actual price =
1. Purchase price variance = (Standard Price - Actual Price) Actual Quantity Purchased
= ($7.50 - $6.67) 3,000 = $2,490 Favorable
As the price at which units are purchased is less than standard, the variance is favorable.
2. Direct Material Usage Variance = ( Standard Quantity - Actual Quantity) Standard Rate
= (5,600 - 6,000) $7.50
= - $3,000 Unfavorable
As we can see, the actual quantity used is higher than the standard quantity, therefore the variance is unfavorable.