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A company developed the following per-unit standards for its product: 5 kilograms of direct materials at $3 per kilogram.Last month, 1,000 kilograms of direct materials were purchased for $2,900.Also last month, 700 kilograms of direct materials were used to produce 135 units.
-What was the direct materials price variance for last month?
A)$12,100 favourable
B)$100 favourable
C)$12,100 unfavourable
D)$100 unfavourable

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $3 per kilogram, and the actual price paid was $2,900 for 1,000 kilograms, which is $2.90 per kilogram. Therefore, the variance is ($2.90 - $3) x 1,000 = -$100, indicating a $100 favourable variance because the actual price is less than the standard price.

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