Use the information below to answer the following question(s).Robb Industries Inc.(RII), developed standard costs for direct material and direct labour.In 2019, RII estimated the following standard costs for one of their major products, the 10-litre plastic container. During June 2020, 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 rate 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 2019, RII estimated the following standard costs for one of their major products, the 10-litre plastic container.  During June 2020, 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 rate variance is
A)$980 unfavourable. 
B)$1,000 favourable. 
C)$680 favourable. 
D)$980 favourable. 
E)$1,000 unfavourable.

Quizplus · Accepted Answer

To calculate direct material rate variance, we use the following formula:
Direct material rate variance = (Standard price - Actual price) x Actual quantity

Standard price of direct material per kilogram for RII = $30
Actual price of direct material per kilogram = $32
Actual quantity of direct material used = 490 kilograms

Direct material rate variance = ($30 - $32) x 490 = $980 unfavourable. Therefore, the correct answer is A) $980 unfavourable.

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