Straton Company produces one product, the H2001.Each unit of H2001 requires 6.5 pounds of raw material with a standard cost of $12.00 per pound.During July, Straton purchased 3,500 pounds of this raw material at a price of $12.25 per pound and used 3,280 pounds to produce 500 units of the H2001.How much is the material price variance?
A)$3,000 unfavorable
B)$360 unfavorable
C)$875 unfavorable
D)$820 unfavorable

Question

Quizplus · Accepted Answer

Material price variance is calculated as (actual price - standard price) x actual quantity purchased.

Actual price = $12.25 per pound
Standard price = $12.00 per pound
Actual quantity purchased = 3,500 pounds

Material price variance = ($12.25 - $12.00) x 3,500 = $875 unfavorable

Straton Company Produces One Product, the H2001