PlasBas Co. uses recycled plastic to manufacture shopping baskets for local retailers. The standard price of the recycle plastic is $0.50 per kg and standard usage of recycled plastic is 0.2kg for each basket. The budgeted production was 80,000 baskets.
Due to recent government incentives to encourage recycling, the standard price of recycled plastic was expected to reduce to $0.40 per kg. The actual price paid by the company was $0.42 per kg, and 100,000 baskets were manufactured using 20,000kg of recycled plastic.
What is the materials operational price variance?
(a) $2,000 favourable
(b) $1,600 favourable
(c) $400 adverse
(d) $320 adverse