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Material Price Variance

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Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of direct labor hours. The company uses a standard cost system and has established the following standards for one unit of product:

Standard Standard Price Standard
Quantity or Rate Cost
Direct materials 1.5 pounds $3.00 per pound $4.50
Direct labor 0.6 hours $6.00 per hour $3.60
Variable manufacturing overhead 0.6 hours $1.25 per hour $0.75

During March, the following activity was recorded by the company:

- The company produced 3,000 units during the month.
- A total of 8,000 pounds of material were purchased at a cost of $23,000.
- There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse.
- During March, 1600 direct labor hours were worked at a rate of $6.50 per hour.
- Variable manufacturing overhead costs during March totaled $1,800.
Reference: 10-4

The materials price variance for March is:

$750 F
$1,000 U
$1,000 F
$750 U

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The solution explains the calculation of material price variance

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