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In: Accounting

Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price...

Tharaldson Corporation makes a product with the following standard costs:
Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit
Direct materials 6.6 ounces $ 3.00 per ounce $ 19.80
Direct labor 0.8 hours $ 10.00 per hour $ 8.00
Variable overhead 0.8 hours $ 5.00 per hour $ 4.00
The company reported the following results concerning this product in June.
Originally budgeted output 2,000 units
Actual output 2,500 units
Raw materials used in production 13,900 ounces
Purchases of raw materials 15,000 ounces
Actual direct labor-hours 4,900 hours
Actual cost of raw materials purchases $ 40,000
Actual direct labor cost $ 12,000
Actual variable overhead cost $ 3,000
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for June is:

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Expert Solution

  • Requirement: Material Price Variance

Note: There can be possible two answers, both are provided below

#1 = $ 5000 F

Material Price Variance

(

Standard Rate

-

Actual Rate = $ 40000 / 15000 ounces

)

x

Actual Quantity purchased

(

$                                3.00

-

$                       2.67

)

x

15000

5000

Variance

$              5,000.00

Favourable-F

OR

#2 = $ 4633 F

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity

(

$                                3.00

-

$                       2.67

)

x

13900

4633.333333

Variance

$              4,633.33

Favourable-F


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