Question
Digital Art manufactures wall hangings. The company uses standard costs to prepare its flexible budget. For the second quarter of 20x8, direct material and direct
Digital Art manufactures wall hangings. The company uses standard costs to prepare its flexible budget. For the second quarter of 20x8, direct material and direct labor standards for the company's most popular product were as follows:
Direct material: 1 pound per unit; $12 per pound
Direct labor: 4 hours per unit; $15 per hour
During the quarter, Digital produced 5,000 units. At the end of the quarter, materials records showed that the company used 7,000 pounds of materials, with actual materials costs of $98,000.
Based on these data, what is the direct materials cost variance?
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