Question

James Inc.'s flexible budget for June, based upon actual output, called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound. The Production Department actually used 10,700 pounds of materials costing $7.10 per pound during June.
James's materials price variance for June is:

A. $3,210 unfavorable.
B. $3,210 favorable.
C. $3,150 unfavorable.
D. $3,150 favorable.

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

James Inc.'s flexible budget for June, based upon actual output, called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound. The Production Department used 10,700 pounds of materials costing $7.10 per pound during June.

To calculate the direct materials price variance, we need to use the following formula:

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

Direct material price variance= (7.4 - 7.10)*10,700= $3,210 favorable