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Degregorio Corporation makes a product that uses a material with the following direct material standards: Standard...

Degregorio Corporation makes a product that uses a material with the following direct material standards: Standard Quantity is 3.8 kilos per unit; Standard price is $7.00 per kilo. The company produced 5,600 units in November using 21,750 kilos of the material. During the month, the company purchased 24,800 kilos of the direct material at a total cost of $168,640. The direct materials purchases variance is computed when the direct materials are purchased. The direct materials purchase price variance for November is:

    		 $4,256 F
      		$4,256 U
        		$4,350 F
          		$4,960 F

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          Expert Solution

          Answer)

          Calculation of direct materials purchase price variance

          Direct Materials purchase price variance = (Standard price per Kilo of material – Actual price per kilo of material) X Actual quantity of direct materials purchased

                                                                                          = ($ 7.00 per kilo - $ 6.80 per kilo) X 24,800 Kilo

                                                                                          = $ 4,960 (Favorable)

          Therefore direct materials purchase price variance is $ 4,960(Favorable) and the correct answer in the given question is $ 4,960 F.

          Working Note:

          Calculation of Actual price per kilo of direct material

          Actual price per kilo of direct material = Total actual cost of direct materials purchased/ Total actual quantity of direct material purchased

                                                                                           = $ 168,640/ 24,800 kilos

                                                                                           = $ 6.80 per kilo

          ekkarill92 answered 2 years ago
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