A company uses 40000 gallons of materials for which they paid $7.00 a gallon. The materials price variance was $80000 favorable. What is the standard price per gallon?
A) $2
B) $5
C) $7
D) $9

Question

Quizplus · Accepted Answer

The standard price per gallon can be calculated by first determining the actual cost of the materials, which is 40000 gallons * $7.00/gallon = $280,000. A favorable variance of $80000 means the standard cost was higher than the actual cost, so the standard cost was $280,000 + $80,000 = $360,000. Dividing this by the number of gallons (40000) gives a standard price of $9 per gallon.

A Company Uses 40000 Gallons of Materials for Which They