Leonesio Corporation makes a product that uses a material with the following standards: The company budgeted for production of 3,100 units in August, but actual production was 3,200 units. The company used 27,600 kilos of direct material to produce this output. The company purchased 29,000 kilos of the direct material at a total cost of $118,900. The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for August is:
A) $2,900 U
B) $2,624 U
C) $2,900 F
D) $2,624 F

Question

Leonesio Corporation makes a product that uses a material with the following standards:  The company budgeted for production of 3,100 units in August, but actual production was 3,200 units. The company used 27,600 kilos of direct material to produce this output. The company purchased 29,000 kilos of the direct material at a total cost of $118,900. The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for August is:
A) $2,900 U 
B) $2,624 U 
C) $2,900 F 
D) $2,624 F

Quizplus · Accepted Answer

AQ × AP = $118,900
Materials price variance = (AQ × AP) − (AQ × SP)
= ($118,900) − (29,000 kilos × $4.00 per kilo)
= $118,900 − $116,000
= $2,900 U

Leonesio Corporation Makes a Product That Uses a Material with the Following