Matt Company uses a standard cost system. Information for raw materials for Prod
ID: 2435692 • Letter: M
Question
Matt Company uses a standard cost system. Information for raw materials for Product RBI for the month of October follows:Standard price per pound of raw materials = $1.60
Actual purchase price per pound of raw materials = $1.55
Actual quantity of raw materials purchased = 2,000 pounds
Actual quantity of raw material used = 1,900 pounds
Standard quantity allowed for actual production = 1,800 pounds
What is the materials purchase price variance?
$90 favorable
$90 unfavorable
$100 favorable
$100 unfavorable
show work please
Explanation / Answer
They are paying $1.55 per pound of material when the standard is $1.60. This means they are paying 0.05 below the standard. So we can take this 0.05 and multiply it by how much they are actually buying to see how much they saved. 0.05 x 2000 = $100 This is favorable because they are saving $100 by spending below the standard. Remember to rate please - thanks.