Math Problem Statement

What is the materials price variance for January given the provided standard costs, actual quantities, and costs?

Solution

To calculate the materials price variance, the formula is:

Materials Price Variance=(Actual Price per PoundStandard Price per Pound)×Actual Quantity Purchased\text{Materials Price Variance} = (\text{Actual Price per Pound} - \text{Standard Price per Pound}) \times \text{Actual Quantity Purchased}

Given Data:

  • Actual cost of materials purchased = $65,910
  • Actual quantity of materials purchased = 16,900 pounds
  • Standard price per pound = $4.00

Step 1: Calculate the Actual Price per Pound

Actual Price per Pound=Total Actual CostActual Quantity Purchased\text{Actual Price per Pound} = \frac{\text{Total Actual Cost}}{\text{Actual Quantity Purchased}} Actual Price per Pound=65,91016,900=3.90\text{Actual Price per Pound} = \frac{65,910}{16,900} = 3.90

Step 2: Calculate the Materials Price Variance

Materials Price Variance=(3.904.00)×16,900\text{Materials Price Variance} = (3.90 - 4.00) \times 16,900 Materials Price Variance=(0.10)×16,900=1,690\text{Materials Price Variance} = (-0.10) \times 16,900 = -1,690

Since the variance is negative, it is Unfavorable (U).

Final Answer:

$1,690U\boxed{\$1,690 \, \text{U}}

Would you like a further breakdown or clarification?

Related Questions:

  1. What is the formula for the materials usage variance, and how is it calculated in this scenario?
  2. How do variable overhead costs impact the overall cost variance analysis?
  3. Can you explain why variances are classified as favorable or unfavorable?
  4. How does direct labor efficiency variance differ from material price variance?
  5. Why might a company experience an unfavorable price variance?

Tip:

Always compare actual and standard costs or quantities carefully to determine the reason for variances—whether due to efficiency, pricing, or other operational factors.

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Math Problem Analysis

Mathematical Concepts

Variance Analysis
Standard Costing

Formulas

Materials Price Variance = (Actual Price per Unit - Standard Price per Unit) × Actual Quantity Purchased
Actual Price per Unit = Total Actual Cost / Actual Quantity Purchased

Theorems

Variance Classification (Favorable or Unfavorable)

Suitable Grade Level

Grades 10-12 or introductory college-level accounting