Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
|
Standard Quantity
|
Standard Price or Rate
|
Standard Cost
|
|
Direct materials
|
2.5 pounds
|
$6.50 per pound
|
$16.25
|
|
Direct labor
|
0.6 hours
|
$20 per hour
|
$12.0
|
|
Variable manufacturing overhead
|
0.6 hours
|
$4.75 per hour
|
$2.85
|
During March, the following activity was recorded by the company:
- The company produced 5,800 units during the month.
- A total of 18,500 pounds of material were purchased at a cost of $51,800.
- There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,700 pounds of material remained in the warehouse.
- During March, 3,680 direct labor-hours were worked at a rate of $20.50 per hour.
- Variable manufacturing overhead costs during March totaled $10,688.
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for March is:
$68,450 U
$29,300 F
$29,300 U
$68,450 F