Use the information below to answer the following question(s).
Robb Industries Inc. (RII), developed standard costs for direct material and direct labour. In 2013, RII estimated the following standard costs for one of their major products, the 10-litre plastic container.
During June, RII produced and sold 5,000 containers using 490 kilograms of direct materials at an average actual cost per kilogram of $32 and 250 direct manufacturing labour-hours at an average actual wage of $15.25 per hour.
-June's direct material price variance is
A) $980 unfavourable.
B) $1,000 favourable.
C) $680 favourable.
D) $980 favourable.
E) $1,000 unfavourable.

Question

Use the information below to answer the following question(s).
Robb Industries Inc. (RII), developed standard costs for direct material and direct labour. In 2013, RII estimated the following standard costs for one of their major products, the 10-litre plastic container.
  During June, RII produced and sold 5,000 containers using 490 kilograms of direct materials at an average actual cost per kilogram of $32 and 250 direct manufacturing labour-hours at an average actual wage of $15.25 per hour.
-June's direct material price variance is
A) $980 unfavourable. 
B) $1,000 favourable. 
C) $680 favourable. 
D) $980 favourable. 
E) $1,000 unfavourable.

Quizplus · Accepted Answer

To calculate the direct material price variance, we use the formula:
Direct Material Price Variance = (Actual Price - Standard Price) x Actual Quantity

Here, Actual Quantity = 490 kilograms
Actual Price = $32 per kilogram
Standard Price = $30 per kilogram (given in the information)

Direct Material Price Variance = ($32 - $30) x 490 = $980 unfavourable

Therefore, the correct answer is A) $980 unfavourable.

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