Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity 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 Jan. 1. Variable overhead is applied to production on the basis of standard direct labor hours. During January, the following activity was recorded by the company:
• 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 Jan. 31: 3,000 pounds
The materials price variance for January is:
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