Answer: 1 dependent
Explanation:
Only Dale can be claimed as a dependent as he is a qualifying child who is under 24 and is a full time student.
Kim cannot be claimed as a dependent as Kim is above the age of 19. To be a qualifying child for dependency, Kim would have to be less than 19 or less than 24 were Kim a full time student.
Grant also does not qualify as a dependent under the Qualifying relative designation as Grant's gross income of $5,000 exceeds the limit of $4,200 that Grant would have to be making less than in 2019 to be claimed as a qualifying relative.
Chester's balance sheet has $105,038,000 in equity. Further, the company is expecting net income of 3,000,000 next year, and also expecting to issue $4,000,000 in new stock. If there are no dividends paid what will beChester's book value?
Answer:
$112,038,000
Explanation:
The book value is computed as shown below:
= Equity balance + net income + issue of new stock
= $105,038,000 + $3,000,000 + $4,000,000
= $112,038,000
Which of the following is an example of an oligopolistic market with a standardized product?
A) The market for breakfast cereal.
B) The market for aluminum.
C) The market for jewelry.
D) The market for automobiles.
Answer:
B) The market for aluminum.
Explanation:
An oligopoly is a market form in which the market or industry is dominated by a small group of large sellers. Oligopolies can result from various forms of collusion that reduce market competition which then majorly leads to higher prices for consumers. They have their own market structure.
Oligopolistic market with standardised product is an homogeneous oligopoly that is an oligopoly in which firm produce a standardised product. And a good example of that is the Aluminum market.
A firm recently reported EBITDA of $3.95 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $1.2 million. How much was its free cash flow, in millions
Answer:
Free cash flow=$2.37
Explanation:
Calculation for how much was its free cash flow, in millions
Using this formula
Free cash flow =[ (Operating income * (1- tax rate) + Depreciation- Expenditures on fixed assets and net operating working capital]
Where,
Operating income =$3.95
(1- tax rate) = (1 - .40)
Depreciation=$1.20
Expenditures on fixed assets and net operating working capital=$1.2
Let plug in the formula
Free cash flow = [($3.95 * (1 - .40) + $1.20 - $1.2]
Free cash flow=$3.95*0.60+$1.20-$1.2
Free cash flow=$2.37+$1.20-$1.2
Free cash flow=$3.57-$1.2
Free cash flow=$2.37
Therefore the amount of its free cash flow, in millions will be $2.37
XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA has engaged in market _________.
Answer: segmentation
Explanation:
Market segmentation is when a business market that is made up of different customers is being divided, into smaller groups or segments based on some characteristics.
From the question, we are informed that XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA is using market segmentation.
Market research is a systematic attempt to acquire data about target markets and customers: learn everything you can about them, starting with their names. It is considered as the crucial part of business strategy.
XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA is using market segmentation.
Market segmentation is when a business market that is made up of different customers is being divided, into smaller groups or segments based on some characteristics.
To know more about Market, refer to the link:
https://brainly.com/question/13959285
You own a portfolio that has a total value of $235,000 and it is invested in Stock D with a beta of .82 and Stock E with a beta of 1.43. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D?
Answer:
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On January 1, 2021, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Required:Assuming the market interest rate on the issue date is 8%, the bonds will issue at $320,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Journal entries are given below
Explanation:
Entry for the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021, are prepared as follows
January 01, 2021 (Splash City issues $320,000 of 8% bonds)
Debit Credit
Cash 320,000
Bonds payable 320,000
June 30, 2021 (Interest paid)
Debit Credit
Interest expense $12,800
Cash $12,800
Working
Interest expense = $320,000 x 8% x 6/12
Interest expense = $12,800
December 31, 2021 (Interest paid)
Debit Credit
Interest expense $12,800
Cash $12,800
Working
Interest expense = $320,000 x 8% x 6/12
Interest expense = $12,800
Which of the following is a true statement about the limitation on business interest deductions? This limitation is not imposed on businesses with average annual gross receipts of $25 million of less for the prior three taxable years. A. Interest disallowed by this limitation is carried back three years and then forward five years B. The limitation is calculated as a percentage of the taxpayers total taxable income C. This limitation is not imposed on businesses with average annual gross receipts of $26 million or less for the prior three taxable years D. All of the choices are false E. All of the choices are true
Answer:
Limitation on Business Interest Deductions:
B. The limitation is calculated as a percentage of the taxpayers total taxable income
Explanation:
30% (or 50% for years 2019 and 2020, as amended by the CARES Act) of the adjusted taxable income of a business is the limit of business interest expense that is allowed by the IRS. The excess after this limitation may be carried forward by the tax paying organization to future tax years indefinitely until the interest expense is completely applied.
Following the CARES Act, "the business interest expense deduction limitation does not apply to certain small businesses whose gross receipts are $26 million or less, electing real property trades or businesses, electing farming businesses, and certain regulated public utilities. The $26 million gross receipts threshold, which applies for the 2020 tax year, is adjusted annually for inflation."
Assume the Apple division of the Gala Company had the following results last year (in thousands). Managements required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. What is Apple division's residual income
Answer:
$50,000
Explanation:
The computation of the residual income for each division is shown below:
As we know that
Residual income = Operating income - target income
where,
Operating income is given in the question
And, the target income could be calculated by
= Average invested assets × required rate of return
= $4,500,000 × 10%
= $450,000
So, the residual income is
= $500,000 - $450,000
= $50,000
A car dealership union negotiates a contract that dramatically increases the salaries of all salesmen. If one of the salesmen is thinking of changing careers to be a hardware salesman, his opportunity cost:___________.
a. Would not be affected
b. Of becoming a hardware salesman would decrease
c. Of becoming a hardware salesman would increase
d. None of the above
Answer:
c. Of becoming a hardware salesman would increase
Explanation:
Opportunity cost defines that when a person gets to benefit from another than he received. So, that person takes another benefit from where he gets more benefit or we can say that he will choose the best alternative.
According to the given situation, A car dealership association is negotiating a contract that significantly increases all salesmen 's wages. Now, the Opportunity cost when one of the salespersons feels that shifting the path to hardware is of becoming a hardware salesperson that would increase.
Hence, the right answer is C
a company bought a piece of equipment for A200 and expects to use it for eight years. The company that plans to
Answer:
The correct option b. $2,567.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
A company bought a piece of equipment for $49,200 and expects to use it for eight years. The company then plans to sell it for $4,000. The company has already recorded depreciation of $42,632.60. Using the double-declining-balance method, what is the company's annual depreciation expense for the upcoming year? (Round your answer to the nearest whole dollar amount.)
a. $11,300.
b. $2,567.
c. $19,200.
d. $1,642.
The explanation to the answer is now given as follows:
Note: See the attached excel file for the calculation of the annual depreciation expenses.
Double declining depreciation method is an accelerated depreciation technique due to the fact the depreciation expenses are charged faster under it than under straight-line depreciation method.
The depreciation of double declining method is calculated by by multiplying the rate of straight-line depreciation method by 2.
From the question, the already recorded depreciation of $42,632.60 is the accumulated depreciation expenses for the 7th year.
Since the upcoming year is the 8th year which is the last year, the depreciation expense for it can be calculated as by adjusting for the residual value of $4,000 follows:
Equipment cost = $49,200
Accumulated Depreciation = $42,632.60
Residual value = $4,000
Estimated useful life = 8 years
Therefore, we have:
Straight line method depreciation rate = 1 / Estimated useful life = 1 / 8 = 0.125, or 12.50%
Double declining depreciation rate = Straight line method depreciation rate * 2 = 12.50% * 2 = 25%
Beginning book value of the equipment in the upcoming year or in the 8th year = Equipment cost - Accumulated Depreciation = $49,200 - $42,632.60 = $6,567.40
Annual depreciation expense for the upcoming year or for the 8th year = Beginning book value of the equipment - Residual value = $6,567.40 - $4,000 = $2,567
Therefore, the correct option b. $2,567.
Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Compute the division's return on investment:
Answer:
14.7%
Explanation:
The computation of return on investment is shown below:
Return on Investment = Net Income ÷ Average total assets × 100
where,
Net Income is
= Sales - Cost of goods sold - Operating expense
= $4,525,000 - $2,550,000 - $1,372,000
= $603,000
And,
Average total assets = $4,100,000
So,
Return on Investment is
= $603,000 ÷ $4,100,000 × 100
= 14.7%
A company’s common stock has a market value of $63.18 per share and its next dividend is expected to be $3.26 per share. The stock’s beta is 1.2, the tax rate is 35%, and the market risk premium is 6.1% per year. The yield to maturity for the company’s long-term debt is 6.4% per year. If the riskiness of the company’s equity requires that it provide a risk premium of 3.2% per year over the yield on its long-term debt, what is the company’s annual cost of internal equity financing?
Answer:
Cost of equity = 9.6%
Explanation:
The cost of equity is the return a firm theoretically pays to its equity investors, In order to calculate the cost of equity here we need to add up the yield to maturity for the company's long term debt and the risk premium per year over the yield on its long term debt.
Solution
Cost of equity = Yield to maturity + Risk premium
Cost of equity = 6.4% + 3.2%
Cost of equity = 9.6%
Quantitative Problem 1: Assume today is December 31, 2017. Barrington Industries expects that its 2018 after-tax operating income [EBIT(1 – T)] will be $450 million and its 2018 depreciation expense will be $65 million. Barrington's 2018 gross capital expenditures are expected to be $110 million and the change in its net operating working capital for 2017 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 4.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 9%; the market value of the company's debt is $3 billion; and the company has 180 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects. Using the free cash flow valuation model, what should be the company's stock price today (December 31, 2017)? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
$29.630
Explanation:
For computation of stock price first we need to follow some steps which is shown below:-
Free cash flow = EBIT (1 - T) + Depreciation - Capital expenditure - Working capital
= $450 million + $65 million - $110 million - $30 million
= $375 million
Value of firm = Free cash flow ÷ (WACC - Growth)
= $375 million ÷ (9% - 4.5%)
= $375 million ÷ 0.045
= $8,333.33 million
Value of equity = Value of firm - Value of debt
= $8,333.33 million - $3,000 million
= $5,333.33 million
Stock price = Value of equity ÷ Outstanding shares
= $5,333.33 million ÷ 180 million
= $29.630
BMM Industries pays a dividend of $2 per quarter. The dividend yield on its stock is reported at 4.8%. What is the stock price?
Kaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of 0.6. Which of the following statements is most accurate? The equilibrium expected rate of return is higher for Kaskin than for Quinn. The stock of Kaskin has more total risk than Quinn. The stock of Quinn has more systematic risk than that of Kaskin.
Answer:
The equilibrium expected rate of return is higher for Kaskin than for Quinn.
Explanation:
Option A “The equilibrium expected rate of return is higher for Kaskin than for Quinn” is more accurate because the expected return is calculated by multiplying the risk premium with beta value and then adding with risk-free return. However, if the beta value is high, then the magnitude after multiplying with the risk premium will be high. Moreover, is magnitude will be added to risk-free return to find the expected return. Thus, it can be seen that Kaskin has high beta 1.2 as compared to Quinn’s beta value 0.6. So, the Kaskin has a higher expected return.
Match the product cost variance with the manager most probably responsible. Some answers may be used more than once. Some answers may not be used.
1. Variable overhead cost variance
2. Direct matierals efficiency variance
3. Direct labor cost variance
4. Fixed overhead cost variance
5. Direct materials cost variance
CHOICES:
a. Human resources
b. Purchasing
c. Production
Answer:
1 = A
2 = C
3 = C
4 = C
5 = B
Explanation:
This would actually depend on how the organization is set up and what type of business it is, but I believe these would be the most likely centers responsible for the difference
_____ is a method for determining the estimated annual costs and benefits for a project and the resulting annual cash flow.
Answer:
Cash flow analysis, is the right answer.
Explanation:
“Cash flow analysis” is the method that determined the actual cash that goes out of the business and the actual cash that comes in the business. Basically this method is used for financial purposes. This method exhibits the actual cost that the business has incurred and the actual benefit it has earned. Moreover, new investors that invest in the company primarily sees the financial report of the company and then take the decision to invest.
A newly formed firm must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $172 in either case.
Omaha Kansas City
Annual fixed costs ($ millions) $1.0 $1.1
Variable cost per unit $30 $45
Expected annual demand (units) 9800 11,625
Required:
Using the above information, determine what the profit would be for Kansas City.
Answer:
Profit for Kansas City = $376,375
Explanation:
a) Data and Calculations:
Omaha Kansas City
Expected annual demand (units) 9,800 11,625
Annual fixed costs $1,000,000 $1,100,000
Variable cost per unit $30 $45 $294,000 $523,125
Total cost $1,294,000 $1,623,125
Revenue $1,685,600 $1,999,500
Profit $391,600 $376,375
From the above differential analysis, it appears that locating in Omaha would be better and more profitable than locating in Kansas City for the company. This is based on the fact that more profit ($15,225) will be generated with Omaha location than locating in Kansas City.
Ornaments, Inc., is an all-equity firm with a total market value of $597,000 and 26,200 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $84,900 if the economy is normal. If there is a recession, EBIT will be 20 percent lower, and if there is a boom, EBIT will be 30 percent higher. The tax rate is 34 percent. What is the EPS in a recession
Answer:
The EPS in a recession is $1.71.
Explanation:
Earnings per share (EPS) = Earnings Attributable to holders of Common Stocks ÷ Weighted Average Number of Common Stocks
Earnings Attributable to holders of Common Stocks = ($84,900 - ($84,900 × 0.34)) × 80 %
= $44,827.20
Weighted Average Number of Common Stocks = 26,200 shares
Earnings per share (EPS) = $44,827.20 ÷ 26,200 shares
= $1.71
Which of the following is one of the two fundamental issues that the recommendations of the 1947 Hutchins Commission on social responsibility in journalism were based on?a. Society's welfare is paramount. b. Morality should be a business practice. c. Corporate responsibility is essential. d. The golden rule should be written in stone.
Answer:
a. Society's welfare is paramount.
Explanation:
A commission on the freedom of press also known as "The Hutchins Commission" was formed in the United States of America (USA) during the World War II (WWII) by Robert Maynard Hutchins.
In 1947 after deliberating on the issues of press for four (4) years, the Hutchins Commission concluded that society's welfare is paramount, this is one of the two fundamental issues that the recommendations of the 1947 Hutchins Commission on social responsibility in journalism is based on. The commission stated that the development and stability of a society is influenced by the operations of the press and as such it is very important that the mass media (press) is socially responsible.
Some of the guidelines or recommendations made by the Hutchins Commission for the press are;
1. Present meaningful, reliable and accurate news to the general public; not opinions.
2. Present an overall view of what was known about society.
3. Avail the citizens an opportunity for constructive criticism and exchange of comment about the government.
Bella Pool Company sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation is
Answer:
The transaction price allocated to the pool and the installation is $124,540.54 and $19,459.46 respectively.
Explanation:
Price Allocation to Pool = $144,000 * (128,000 / (128,000 + 20,000))
Price Allocation to Pool = $144,000 * 0.864865
Price Allocation to Pool = $124,540.54
Price Allocation to Installation = $144,000 * (20,000 / (128,000 + 20,000))
Price Allocation to Installation = $144,000 * 0.135135
Price Allocation to Installation = $19,459.46
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?a. For Review tabb. Reviewed tabc. Recognized tab d. Excluded tab
Answer:
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?
a. For Reviewed tab
Explanation:
In QuickBooks online, you have the Reviewed tab where you can download at least the last 90 days of transactions, made with your bank or credit card. QuickBooks is also able to categorize all the downloaded transactions you have done. In the reviewed tab you can find all the accepted bank transactions.
Auto Body Repair Shop (ABRS) promises to pay Ben $1,000 a week to work for ABRS. Ben accepts and quits his job with Car Care Service. ABRS fails to provide a job for Ben. Ben has a cause of action based on
Answer:
Breach of Contract
Explanation:
If a contract was signed that promised a job/salary, then rescinding the job by the prospective employer is grounds for a "Breach of Contract" lawsuit.
A company plans to invest X at the beginning of each month in a zero-coupon bond in order to accumulate 100,000 at the end of six months. The price of each bond as a percentage of redemption value is given in the following chart:1 2 3 4 5 6 ; 99% 98% 97% 96% 95% 94%; Calculate X given that the bond prices will not change during the six-month period.
Answer:
x = $16,078.46
Explanation:
$100,000 = 1.0101x + 1.0204x + 1.0309x + 1.0417x + 1.0526x + 1.0638x
$100,000 = 6.2195x
x = $100,000 / 6.2195 = $16,078.46
month investment value at end of month 6
1 $16,078.46 $17,104.74
2 $16,078.46 $16,924.68
3 $16,078.46 $16,748.39
4 $16,078.46 $16,575.73
5 $16,078.46 $16,406.59
6 $16,078.46 $16,240.87
total $96,470.76 $100,001*
*the extra $1 is due to rounding errors.
Longman Company manufactures shirts. During June, Longman made 1,900 shirts but had budgeted production at 2,150 shirts. Longman gathered the following additional data:
Variable overhead cost standard $0.80 per DLHr
Direct labor efficiency standard 4.50 DLHr per shirt
Actual amount of direct labor hours 8,620 DLHr
Actual cost of variable overhead $10,344
Fixed overhead cost standard $0.10 per DLHr
Budgeted fixed overhead $968
Actual cost of fixed overhead $1,033
Required:
a. Calculate the variable overhead cost variance.
b. Calculate the variable overhead efficiency variance.
c. Calculate the total variable overhead variance.
d. Calculate the fixed overhead cost variance.
e. Calculate the fixed overhead volume variance
Answer:
a. variable overhead cost variance- $3,448 Unfavorable
b. variable overhead efficiency variance- $ 56 unfavorable
c. total variable overhead variance - $3,504 Unfavorable
d. fixed overhead cost variance - $65 unfavorable
e. Fixed overhead volume variance -$ 112.5 unfavorable
Explanation:
Variable overhead rate variance $
8,620 hours should have cost (8,620 × $0.80) 6896
but did cost 10,344
Variable overhead rate variance 3,448 Unfavorable
Variable overhead rate variance =$3,448 unfavorable
Efficiency variance Hours
190 units should have taken (1,900 × 4.50 hrs) 8,550
but did take 8,620
Efficiency variance in hours 70 unfavorable
Standard rate × $0.80
Efficiency variance $ 56 unfavorable
Efficiency variance =$ 56 unfavorable
Total variable overhead= rate variance +efficiency
Total variable overhead = $3,448 UF + $ 56 UF = $3,504 U
Total variable overhead = $3,504 Unfavorable
Fixed overhead cost variance
$
Budgeted cost 968
Actual cost 1,033
Fixed overhead cost Variance 65 unfavorable
Fixed Overhead Volume
Units
Budgeted units 2,150
Actual units 1,900
Variance 250
Standard fixed cost per unit (Notes) $0.45
Volume Variance 112.5 unfavorable
Standard fixed overhead cost per unit
= standard hours × standard Fixed overhead rate = 4.5 × $0.1= $0.45
a. variable overhead cost variance- $3,448 Unfavorable
b. variable overhead efficiency variance- $ 56 unfavorable
c. total variable overhead variance - $3,504 Unfavorable
d. fixed overhead cost variance - $65 unfavorable
e. Fixed overhead volume variance -$ 112.5 unfavorable
Which of the following statements is CORRECT? a. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate. b. Short-term debt is favored by firms because, while it is generally more expensive than long-term debt, it exposes the borrowing firm to less risk than long-term debt. c. Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies. d. Trade credit is provided only to relatively large, strong firms. e. Commercial paper is typically offered at a long-term maturity of at least five years.
Answer: Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies.
Explanation:
Commercial papers a promissory notes which are issued by companies on a short term basis that are unsecured. It should be noted that that they are used by the strong, large, and financially stable companies.
Commercial paper are issued in order to finance payroll, and also meet a company's short-term liabilities.
The accounts receivable turnover is computed as __________ divided by __________. sales; accounts receivable sales; average accounts receivable sales; net income accounts receivable; net income
Answer:
sales ; average accounts receivables
Explanation:
Accounts receivable turnover refers to how a business firm manage its assets. Businesses, companies uses accounts receivables to know and quantify how perfectly goods bought on credit by their customers are being paid back. It also measures how business gives credit and collects back it's debt .It is calculated as net sales divided by average accounts receivables.
Morgan Company issues 10%, 20-year bonds with a par value of $720,000 that pay interest semiannually. The current market rate is 9%. The amount paid to the bondholders for each semiannual interest payment is:
Answer:
$36,000
Explanation:
Calculation for the amount to be paid to the bondholders for each semiannual interest payment
Using this formula
Semiannual interest payment = Face value Amount*Interest Rate*Time
Let plug in the formula
Semiannual interest payment = $720,000*0.10*0.50
Semiannual interest payment = $36,000
The amount paid to the bondholders for each semiannual interest payment is $36,000
Suppose the rate of inflation was 2 percent in India from 2008-2012 and, over that same period, the inflation rate in the United States was 2.7 percent. Based on these inflation trends, which of the following is true?
a. The PPP condition implies that the rupee has depreciated relative to the dollar.
b. The PPP condition implies that the rupee has appreciated relative to the dollar
Answer:
b. The PPP condition implies that the rupee has appreciated relative to the dollar
Explanation:
Remember, the inflation rate looks at how the prices of goods and services in a country increases over a period of time, and it's effects on the the purchasing value or power of money in the country.
As in this scenario, India had 2 percent inflation rate while United States had 2.7 which is a higher price increases not in a different period but the same one, meaning that the Purchasing power parity (PPP) condition of the rupee has appreciated relative to the dollar from 2008-2012.
A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month, 2200 gallons of direct materials were purchased for $16720. The direct materials price variance for last month was
Answer:
$880 favorable
Explanation:
The computation of direct materials price variance for last month is shown below:-
Direct material price variance = Actual quantity × (Standard price - Actual price)
= 2,200 × ($8 - ($16,720 ÷ 2,200)
= 2,200 × ($8 - 7.6)
= 2,200 × $0.4
= $880 Favorable
Therefore for computing the direct materials price variance for last month we simply applied the above formula.
