Mid City Products Inc. (MCP), developed standard costs for direct material and d
ID: 2564751 • Letter: M
Question
Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. Budgeted quantity
Direct materials = 1 pounds Direct Labor= .7 hours
Budgeted price
Direct materials =$6.40 per pound Direct labor $20 per hour
During September, MCP produced and sold 1,000 units using 1,400 pounds of direct materials at an average cost per pound of$6 and 650 direct labor hours at an average wage of $20.25 per hour. The direct material price variance during September is ________.
A.
$2,000unfavorable
B.
$2,000favorable
C.$560favorable
D.$560unfavorable
Explanation / Answer
Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U Material price variance = (AP-SP)*AQ AP = Actual price per unit = $6 SP = Standard price per unit = $6.40 AQ = Actual quantity consumed= 1400 F= Favourable U = Unfavourable Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U 6 6.4 0.4 1400 560 F