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The following information is available for Munter Manufacturing Company
The following information is available for Munter Manufacturing Company.
-- Direct materials price standard is $3.25 per pound.
-- Direct materials quantity standard is six pounds per finished unit.
-- Budgeted production is 25,000 finished units.
-- 175,000 pounds of direct materials were purchased for $525,000.
-- 175,000 pounds of direct materials were used in production.
-- 25,600 finished units of product were produced.
What is the direct materials price variance?
Expert Solution
Computation of the direct materials price variance:-
Direct materials Price Variance = (Actual price - Standard price) * Actual quantity
= (($525,000 / 175,000) - $3.25) * 175,000
= ($3 - $3.25) * 175,000
= $0.25 * 175,000
= $43,750 (F)
The direct materials price variance is favorable because the actual price is lower than the standard price.
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