Question & Answer: The following materials standards have been established for a particular product: Standard quantity per unit of output 4.2 meters Standard pr…..

The following materials standards have been established for a particular product: Standard quantity per unit of output 4.2 meters Standard price $ 18.40 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,200 meters Actual cost of materials purchased $ 138,600 Actual materials used in production 6,700 meters Actual output 1,550 units

What is the materials price variance for the month?

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$3,658 U

$7,700 U

$11,770 U

$6,120 U

Expert Answer

 

STANDARD COST FOR MATERIAL
Std. Quantity Per Unit Standard Price Standard Cost Per Unit
4.2 18.4 77.28
Actual Rate per unit = Actual Cost / Actual Material Purchased
Actual Rate per unit = $138,600 / 7200
Actual Rate per unit = $ 19.25 Per Meter
Material price Variance = (Standard Price – Actual Price) * Actual Quantity
Standard Prcie = $18.40 Per Meter
Actual Prcie = $19.25 Per Meter
Actual Quantity Purchased = 7200 Meters
Material price Variance = ($18.40 – $19.25) * 7200 Meters
Material price Variance =   $ 0.85 * 7200 Meters
Material price Variance =   $ 6120 (Unfavorable)
Answer = Option 4= Material Price variance = $ 6120 (Unfavorable)

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