Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is: Direct materials standard (7 kg. @ $2/kg) $ 14 per finished unit
Actual cost of materials purchased $ 322,500 ^Actual^direct^materials^purchased^and^used^150,000lbs.

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $2/kg, and the actual price is $322,500 / 150,000 lbs = $2.15/kg. The variance is ($2.15 - $2) x 150,000 lbs = $22,500 unfavorable.

Parallel Enterprises Has Collected the Following Data on One of Its