QUESTION 54

1. Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

   	Standard Quantity	Standard Cost per Bag
   Direct Materials	20 kilograms	$8.00
   Direct Labor	0.1 hours	1.10
   Variable Manufacturing Overhead	0.1 hours	.40

   The company had no beginning inventories of any kind on January 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. The results of the company's operations during January are as follows:

   Production of Fastgro:	4,000 bags
   Direct Materials Purchased	85,000 kilograms at a cost of $32,300
   Direct Labor Used	390 hours at a cost of $4,875
   Variable Manufacturing Overhead Incurred	$1,475
   Inventory of Direct Materials on January 31	3,000 kilograms

   What was the materials price variance for January?

   		$1,300 unfavorable
   		$1,640 favorable
   		$1,640 unfavorable
   		$1,700 favorable