Matthew Corporation manufactures paper shredding equipment. Each paper shredder
ID: 2417111 • Letter: M
Question
Matthew Corporation manufactures paper shredding equipment. Each paper shredder has a standard materials cost of 20 pounds at $7.50 per pound or $150.00 in total. 40,000 pounds of materials were purchased for $320,000 during the period and 39,000 pounds were used in the production of 2,000 good units. What is the direct materials price variance? Use "U" or "F" to indicate whether the variance is unfavorable or favorable. Do not show your work or include any additional text with your answer. For example, if your answer is $100,000 unfavorable, you should enter $100,000 U.
Explanation / Answer
Direct Material Price Variance = (Standard Price - Actual Price) x Actual Quantity used
= (7.50 - 320000/40000) x 39000
= (7.50 - 8) x 39000
= $19500 U