A company developed the following per-unit standards for its product: 2 gallons of direct materials at $6 per gallon. Last month, 3,000 gallons of direct materials were purchased for $17,100. The direct materials price variance for last month was
A) $17,100 favorable.
B) $450 favorable.
C) $900 favorable.
D) $900 unfavorable.

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The actual price per gallon is $17,100 / 3,000 = $5.70. The standard price is $6.00. The variance is ($5.70 - $6.00) x 3,000 = $900 favorable.

A Company Developed the Following Per-Unit Standards for Its Product