Digital Art manufactures wall hangings. The company uses standard costs to prepare its flexible budget. For the second quarter of 20×8, direct material and direct labor standards for the company’s most popular product were as follows: Direct material: 1 pound per unit; $12 per pound Direct labor: 4 hours per unit; $15 per hour During the quarter, Digital produced 5,000 units. At the end of the quarter, materials records showed that the company used 7,000 pounds of materials, with actual materials costs of $98,000. Based on these data, what is the direct materials cost variance?
a. $24,000 F.
b. $24,000 U.
c. $2,000 U.
d. $2,000 F.
e. None of the answers is correct.
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