A company bought and used 4,200 kg of material at a total cost of $23,100. The standard price is $5.20 per kg and the standard usage is 4 kg per unit. Actual output was 1,000 units. What are the material price and usage variances?

Correct answer: C) Price $1,260 adverse; usage $1,040 adverse

Explanation

Price variance = $23,100 - (4,200 x $5.20) = $23,100 - $21,840 = $1,260 adverse. Standard quantity for 1,000 units = 4,000 kg. Usage variance = (4,000 - 4,200) x $5.20 = $1,040 adverse. Both are adverse because more was paid per kg and more kg were used than standard.