Question

Golden Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Golden uses standard costs to prepare its flexible budget. For the first quarter of the​ year, direct materials and direct labor standards for one of their popular products were as​ follows: Direct​ materials: 3 pounds per​ unit; $3 per pound ​Labor: 4 hours per​ unit; $24 per hour During the first​ quarter, Golden produced​ 5,000 units of this product. At the end of the​ quarter, an examination of the direct materials records showed that the company used​ 14,500 pounds of direct materials and the direct materials cost variance was​ $3,840 U. Which of the following is a logical explanation for this​ variance?A. The company paid a higher cost for the direct materials than allowed by the standards B. The company paid a higher cost per hour for labor than allowed by the standards. C. The company used more labor hours than allowed by the standards. D. The company used a greater quantity of direct materials than allowed by the standards.

Answer 1

Answer:

A. The company paid a higher cost for the direct materials than allowed by the standards.

Explanation:

The following is a logical explanation for this variance:

Since, the standard quantity of raw materials to be used is 22 pounds x 500 units = 11000 pounds. The actual usage is 9500 pounds ony. Hence, variance in direct material price variance can be only due to higher cost of direct material purchased.