Parallel Enterprises has collected the following data on one

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. What is the direct materials price variance? Direct materials – standard (7 kg. @ $2.40/kg) $16.80 per finished unit Actual cost of materials purchased $402,500 Actual direct materials purchased and used 158,000 lbs

Solution

CALCULATION OF THE STANDARD PRICE PER UNIT Standard Unit (KG) Standard Rate (Per KG) Standard Material Cost per unit 7 $                     2.40 $                            16.80 Calculation of Standard Material Cost for 25000 units Standard Unit (KG) Standard Rate (Per KG) Standard Material Cost 175000 $                     2.40 $                4,20,000.00 (25000 Unit X7 KG) Calculation of the Actual Cost for producing 25000 Units   Actual Qty Actual Rate Actual Material Purchase 158000 $                     2.55 $                4,02,500.00 Material price Variance = (Standard Price - Actual Price) X Actual Qantity) Material price Variance = ($ 2.40 - $ 2.55) X 158000 Material price Variance = $0 .15 X 158000 Material price Variance = $ 23,300 (Unfavorable) Answer = Material Price Variance = $ 23,300 (Unfavourable)