Question

Lightsey Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 14,800 skeins and the actual level of activity was 15,100 skeins. The company's owner budgets for dye costs, a variable cost, at $0.51 per skein. The actual dye cost last month was $8,660. What would have been the spending variance (purchase price variance) for dye costs

Answer 1

Answer:

Direct material price variance= $966.4 unfavorable

Explanation:

Giving the following information:

Actual level of activity was 15,100 skeins.

Standard cost= $0.51 per skein.

The actual dye cost last month was $8,660.

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

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

Actual price= 8,660 / 15,100= $0.574

Direct material price variance= (0.51 - 0.574)*15,100

Direct material price variance= $966.4 unfavorable