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26 June, 00:43

Milar Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or Rate Direct materials 2.0pounds$7.00per pound Direct labor 0.8hours$16.00per hour Variable overhead 0.8hours$4.00per hour In January the company produced 4,500 units using 10,260 pounds of the direct material and 2,240 direct labor-hours. During the month, the company purchased 10,830 pounds of the direct material at a cost of $76,710. The actual direct labor cost was $38,236 and the actual variable overhead cost was $11,937. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

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  1. 26 June, 04:12
    0
    866.4 Unfavorable

    Explanation:

    Standard rate (SR) = $7.00 per pound

    Pounds of direct material purchased, Actual quantity (AQ) = 10,830 pounds

    Actual rate (AR):

    = Cost of direct material : Pounds of direct material purchased

    = $76,710 : 10,830 pounds

    = $7.08

    Materials price variance for January:

    = (Standard rate - Actual rate) * Actual quantity

    = (7.00 - 7.08) * 10,830 pounds

    = 0.08 * 10,830 pounds

    = 866.4 Unfavorable
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