Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter ofthe year, direct materials and direct labor standards for one of their popular products were as follows:Direct materials: 1 pound per unit; $11 per poundDirect labor: 4 hours per unit; $20 per hourOceanside produced 3,000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were$99,300.What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)OA. $6,720 UnfavorableOB. $16,800 FavorableOC. $6,720 FavorableOD. $16,800 UnfavorableC

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Business

Accounting

What is the direct materials cost variance?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

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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Question

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter of
the year, direct materials and direct labor standards for one of their popular products were as follows:
Direct materials: 1 pound per unit; $11 per pound
Direct labor: 4 hours per unit; $20 per hour
Oceanside produced 3,000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were
$99,300.
What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
OA. $6,720 Unfavorable
OB. $16,800 Favorable
OC. $6,720 Favorable
OD. $16,800 Unfavorable
C

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