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 material |
20 pounds |
$8.00 |
|
Direct labor |
0.1 hours |
$1.10 |
|
Variable overhead |
0.1 hours |
$0.40 |
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
– Production of Fastgro: 4,000 bags
– Direct materials purchased: 85,000 pounds at a cost of $32,300
– Direct-labor worked: 390 hours at a cost of $4,875
– Variable overhead incurred: $1,475
– Inventory of direct materials on January 31: 3,000 pounds
The materials price variance for January is