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: