Question

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:

Answer 1

• 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