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Knowledge Check 01 Zeta Corporation is a manufacturer of sports caps, which require soft fabric. The standards for each cap allow 2.00 yards of soft fabric, at a cost of $2.00 per yard. During the month of January, the company purchased and used 25,000 yards of soft fabric at $2.10 per yard, to produce 12,000 caps. What is Zeta Corporation's materials price variance for the month of January

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Zeta Corporation's materials price variance for the month of January is $2,500 Unfavorable.

The difference between the standard cost and actual cost for the purchased actual quantity of material is the direct material price variance.

  • The formulae for the direct Materials price variance is (Standard price – Actual price) * Actual quantity purchased

Given Information

The standard fabric for each cap is 2.00 yard

The standard price per yard is $2.00 per yard

Actual price per yard is $2.10

Actual Quantity is 25,000 yards

Materials price variance = (Standard price - Actual Price) * Actual Quantity

Materials price variance = ($2.00 - $2.10)*25,000

Materials price variance = $0.10*25,000 yard Unfavorable

Materials price variance = $2,500 Unfavorable

Therefore, Zeta Corporation's materials price variance for the month of January is $2,500 Unfavorable.

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