Question: Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product.

During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours.

The price variance for the direct material acquired by Jackson Industries during May is:

a.	$21,600 Favorable
b.	$25,000 Unfavorable
c.	$28,000 Favorable
d.	$21,600 Unfavorable

Direct materials....... Direct labor....... Standard Quantity 5 pounds 1.25 hours Standard Price or Rate $3.60 per pound $12.00 per hour Standard Cost $18.00 $15.00

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