A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700 and entered into production. The direct materials price variance for last month was A) $300 favorable. B) $5,700 favorable. C) $300 unfavorable. D) $150 favorable.
A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700 and entered into production. The direct materials price variance for last month was A) $300 favorable. B) $5,700 favorable. C) $300 unfavorable. D) $150 favorable.
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:A company developed the following per-unit standards for its product: 2 pounds of
direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were
purchased for $5,700 and entered into production. The direct materials price
variance for last month was
A) $300 favorable.
B) $5,700 favorable.
C) $300 unfavorable.
D) $150 favorable.
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