Balt company maintains a standard cost system; as such, all inventories, including materials, are carried on the books at standard cost. last period, balt used 6,000 pounds of material h to produce 800 units of product c8. the company has established a standard of 7 pounds of material h per unit of c8, at a price of $7.50 per pound of material. during the period, balt purchased 3,000 pounds of material h. the company spent $20,000 during the period to purchase material h. required: 1. calculate the direct materials purchase-price variance for the period, rounded to the nearest dollar. 2. calculate the direct materials usage variance for the period, rounded to the nearest whole dollar.

1. Purchase price variance = $2,490 Favorable

2. Direct Material Usage Variance = $3,000 Unfavorable

Explanation:

Provided information, we have

Standard Material per unit = 7 pounds

Actual Units produced = 800 units

Standard units = 800 7 = 5,600 pounds

Actual units = 6,000 pounds

Standard Price per pound = $7.50

Actual price =

1. Purchase price variance = (Standard Price - Actual Price) Actual Quantity Purchased

= ($7.50 - $6.67) 3,000 = $2,490 Favorable

As the price at which units are purchased is less than standard, the variance is favorable.

2. Direct Material Usage Variance = ( Standard Quantity - Actual Quantity) Standard Rate

= (5,600 - 6,000) $7.50

= - $3,000 Unfavorable

As we can see, the actual quantity used is higher than the standard quantity, therefore the variance is unfavorable.

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