Doogan Corporation makes a product with the following standard costs: The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour.
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:
A) $13,320 U
B) $13,320 F
C) $11,544 F
D) $11,544 U

Question

Doogan Corporation makes a product with the following standard costs:  The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour.
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:
A) $13,320 U 
B) $13,320 F 
C) $11,544 F 
D) $11,544 U

Quizplus · Accepted Answer

Materials price variance = AQ × (AP − SP)
= 44,400 grams × ($1.70 per gram − $2.00 per gram)
= 44,400 grams × (−$0.30 per gram)
= $13,320 F

Doogan Corporation Makes a Product with the Following Standard Costs