Chapter 7, Problem 7.18MCQ

Amalgamated Manipulation Manufacturing’s (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw material, purchased 15,000 pounds for $19,500 and ended the month with 4,000 pounds on hand. The company produced 5,000 units of finished goods. The company estimates standard costs at $1.50 per pound. The materials price and efficiency variances for the month of May were:

Price Variance	Efficiency Variance
1. $3,000 U	$1,500 F
2. $3,000 F	$ 0
3. $3,000 F	$1,500 U
4. $3,200 F	$1,500 U