Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company
ID: 2388912 • Letter: C
Question
Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:Standard Standard Cost
Quantity per Bag
Direct material......................................... 20 pounds $8.00
Direct labor............................................. 0.1 hours $1.10
Variable overhead.................................... 0.1 hours $0.40
The company had no beginning inventories of any kind on Jan. 1. Variable overhead is applied to production on the basis of standard direct labor-hours. During January, the following activity was recorded by the company:
Explanation / Answer
Materials price variance is the difference between what the actual quantity of material used did cost and what it should have cost. Actual quantity of material used = 85,000 - 3,000 = 82,000 pounds Cost of Actual quantity of material used =( $32,300/85,000 )*82,000 = 31160 Standard cost of material used = 82,000 pounds*$8 /20= 32800 Materials price variance = 31160-32800 = -$1640