Accelerator, Inc. manufactures a fuel additive called surge. The company produce
ID: 2568155 • Letter: A
Question
Accelerator, Inc. manufactures a fuel additive called surge. The company produces and sells 87,000 containers of surge each month. The company has established the following standards for each container of surge produced: standard quantity standard price direct materials 7 gallons $4.00 per gallon direct labor 2.50 hours $14.00 per hour The following information is available for surge for the month of May: 1. 650,000 gallons of chemicals were purchased at a cost of $2,522,000. At May 31, Accelerator, Inc. had 30,000 gallons of chemical available in the storeroom. 2. 215,000 direct labor hours were worked during May at a total cost of $3,096,000. Calculate the direct material price variance for May. If the variance is unfavorable, enter a U after your number with a space between the number and the U (i.e., 10,000 U). If the variance is favorable, enter an F after your number with a space between the number and the F (i.e., 10,000 F). Quiz scores will not be adjusted for failing to follow these directions. Do not use decimals or a minus sign in your answer.
Explanation / Answer
Material Price Variance = (standard rate - actual rate) x actual qty
= (4 - 2522000/650000) x (650000-30000)
= (4 - 3.88) x 620000
= 74400 F