Question

Baskets Inc. gathered the following actual results for the current month: Actual amounts: ​ Units produced 6000​ Direct materials purchased and used (7600 lbs.) $68,400​Budgeted production and standard costs were: Budgeted production 5500 units Direct materials 3.5 lbs/unit at $6/lb.What is the direct materials price variance?

Answer 1

Answer:

price variance  $(22,800.00) UNFAVORABLE

Explanation:

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

std cost                           $6.00

actual cost                    $9.00

quantity                       7,600

difference                   $(3.00)

price variance  $(22,800.00)

We calculate the actual cost by dividing total cost by the lbs purchased:

68,400/7,600 = 9

Because the diference is negative, the variance is unfavorable.

Each pound cost more than it was planned.