Answer the following questions using the information below:
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
-June's direct material price variance is:
A)$1,960 unfavorable
B)$600 favorable
C)$1,360 favorable
D)None of these answers are correct.

Question

Answer the following questions using the information below:
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
  During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
-June's direct material price variance is:
A)$1,960 unfavorable 
B)$600 favorable 
C)$1,360 favorable 
D)None of these answers are correct.

Quizplus · Accepted Answer

To calculate the direct material price variance, we need to compare the actual cost per pound of direct materials used to the standard cost per pound of direct materials estimated by the company.

Actual cost per pound = $32
Standard cost per pound = $30

Variance = (Actual cost per pound - Standard cost per pound) x Quantity used
Variance = ($32 - $30) x 980 pounds
Variance = $1,960 unfavorable

Therefore, the correct answer is A) $1,960 unfavorable.

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