Question

A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12000 units of product were produced last month and 37500 pounds of direct materials were used, the direct materials quantity variance was_________
A. $4500 unfavorable.
B. $7500 favorable.
C. $4500 favorable.
D. $7500 unfavorable.

Answer 1

Answer:D. $7500 unfavorable

Explanation:

If 3 pounds of direct materials are used to produce one unit of a product invariably to produce 12000 units means 36000 pounds will be used.

On an actual basis the company used 37500 pounds of materials giving an unfavorable variance of 1500 pounds i.e they have consumed more than there budget .

The price per pound of $5 gives total unfavorable balance of $7500