Information on Fleming Company's Direct Material Costs Follows What Was the Company's Direct Material Price Variance?
A) $1,000

question 194

Multiple Choice

Information on Fleming Company's direct material costs follows:
$\begin{array}{|l|r|}\hline \text { Actual amount of direct materials purchased and used } & 20,000 \text { kilograms } \\\hline \text { Actual direct material costs } & \$ 40,000 \\\hline \text { Standard price of direct materials } & \$ 2.10 \text { per kilogram } \\\hline \text { Direct materials quantity variance-favourable } & \$ 3,000 \\\hline\end{array}$
What was the company's direct material price variance?

• A) $1,000 favourable.
• B) $1,000 unfavourable.
• C) $2,000 favourable.
• D) $2,000 unfavourable.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, representing the amount that contributes towards covering fixed costs and generating profit.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, used in financial analysis and grading.

Fixed Expenses

Recurring costs that do not fluctuate with the level of production or sales volume, such as lease payments or salaries.

Contribution Margin Percentage

A measure showing what percentage of sales revenue is available to cover fixed costs and contribute to net income, calculated as (Sales - Variable Costs) / Sales.