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11 January, 09:15

The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:

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  1. 11 January, 10:23
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    Direct material price variance = $3,150 favorable

    Explanation:

    Giving the following information:

    Actual quantity = 22,500 pounds

    Actual cost = $53,000

    Materials quantity variance = $1,875 Unfavorable

    The standard quantity = 21,750 pounds for the units produced.

    First, we need to calculate the estimated price per pound of direct material.

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

    -1,875 = (21,750 - 22,500) * standard price

    -1,875 / (-750) = standard price

    $2.5 = standard price

    Now, we can calculate the direct material price variance using the following formula:

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

    Actual price = 53,000/22,500 = $2.36

    Direct material price variance = (2.5 - 2.36) * 22,500

    Direct material price variance = $3,150 favorable
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