The standard costs and actual costs for direct materials for the manufacture of 3,000 actual units of product are Standard Costs
Direct materials per completed unit)1,040 kilograms at $8.75
Actual Costs
Direct materials
2,000 kilograms at $8.00
The amount of direct materials price variance is
A) $2,750 unfavorable variance
B) $2,750 favorable variance
C) $1,500 favorable variance
D) $1,500 unfavorable variance

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, it is ($8.00 - $8.75) x 2,000 kg = -$1.50 x 2,000 kg = $3,000 favorable. However, the correct calculation should be based on the standard quantity for actual production, which is 3,000 units x 1,040 kg = 3,120,000 kg. The variance is calculated on the actual quantity purchased, so the correct variance is $1,500 favorable.

The Standard Costs and Actual Costs for Direct Materials for the Manufacture