Century Manufacturing developed the following per-unit standards for its product: 4 pounds of direct materials at $6.40 per pound. Last month, 3,000 pounds of direct materials were purchased for $18,240. The direct materials price variance for last month was
a.) $960 F
b.) $480 F
c.) $480 UF
d.) 2160 UF
Please explain how.

Question

10-12-2022
Business

contestada

Century Manufacturing developed the following per-unit standards for its product: 4 pounds of direct materials at $6.40 per pound. Last month, 3,000 pounds of direct materials were purchased for $18,240. The direct materials price variance for last month was
a.) $960 F
b.) $480 F
c.) $480 UF
d.) 2160 UF
Please explain how.

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namrata421 namrata421 · Answer 1 · 2022-12-16T10:21:00+01:00

The direct materials price variance for last month was Price Variance 960.00 F.

(standared cost-actual cost) (standared cost-actual cost)

Actual quantity equals DM price difference Standard cost $6.40; real cost $6.08 (18,240 total cost / 3,000 units bought).

quantity 3,000 (6.40-60.8)

3000 = Price Variation in DM

difference $3.00 multiplied by $0.32 results in a price variation of $960.00.

The actual price was less than expected. It was cheaper to buy each pound. This difference is advantageous.

How is the price variance calculated?

This formula is used to determine price variance: Vmp is calculated as (Actual unit cost - Standard unit cost) x Actual Quantity Bought. Vmp is equal to the difference between actual quantity purchased and actual unit cost.

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