Figure 7
Orient Company has developed the following standards for one of its products:
The following activities occurred during the month of November:
The company records materials price variances at the time of purchase.

-Refer to Figure 7. Orient's materials price variance would be
A) £22,000 unfavorable
B) £18,000 unfavorable
C) £6,000 unfavorable
D) £4,000 unfavorable

Question

Figure 7
Orient Company has developed the following standards for one of its products:
The following activities occurred during the month of November:
  The company records materials price variances at the time of purchase.
 
-Refer to Figure 7. Orient's materials price variance would be
A) £22,000 unfavorable 
B) £18,000 unfavorable 
C) £6,000 unfavorable 
D) £4,000 unfavorable

Quizplus · Accepted Answer

The materials price variance is calculated as the difference between the actual cost per unit of materials and the standard cost per unit of materials purchased, multiplied by the actual quantity of materials purchased.

In November, Orient purchased 12,000 units of materials at a cost of £132,000 (£11 per unit). However, the standard cost per unit is £10.50, based on the given information.

Therefore, the materials price variance is:
(£11 - £10.50) * 12,000 = £6,000 unfavorable.

Option C is the closest choice to this calculation.

Figure 7 Orient Company Has Developed the Following Standards for One of One