Georgia,Inc.has collected the following data on one of its products.The direct materials price variance is:
A)$13,750 unfavorable.
B)$16,250 unfavorable.
C)$16,250 favorable.
D)$30,000 unfavorable.
E)$33,000 favorablE.

Question

Georgia,Inc.has collected the following data on one of its products.The direct materials price variance is: 
A)$13,750 unfavorable. 
B)$16,250 unfavorable. 
C)$16,250 favorable. 
D)$30,000 unfavorable. 
E)$33,000 favorablE.

Quizplus · Accepted Answer

The direct materials price variance is calculated by the difference between the actual price paid for materials and the standard price, multiplied by the actual quantity of materials used. If the actual price paid is higher than the standard price, the variance is unfavorable, and if it is lower than the standard price, the variance is favorable. Based on the given data, the actual price paid for materials is $15 per pound, while the standard price is $17 per pound. The actual quantity of materials used is 10,000 pounds. Therefore, the direct materials price variance is ($15 - $17) x 10,000 = $-20,000 or $16,250 favorable.