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The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:

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facundobuzzetti

Answer:

Direct material price variance= $3,150 favorable

Explanation:

Giving the following information:

Actual quantity= 22,500 pounds

Actual cost= $53,000

Materials quantity variance= $1,875 Unfavorable

The standard quantity= 21,750 pounds for the units produced.

First, we need to calculate the estimated price per pound of direct material.

Direct material quantity variance= (standard quantity - actual quantity)*standard price

-1,875= (21,750 - 22,500)*standard price

-1,875/(-750)= standard price

$2.5= standard price

Now, we can calculate the direct material price variance using the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Actual price= 53,000/22,500= $2.36

Direct material price variance= (2.5 - 2.36)*22,500

Direct material price variance= $3,150 favorable

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