A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,000 pounds of direct materials were purchased for $3,800. The direct materials price variance for last month was
A) $3,800 favorable.
B) $200 favorable.
C) $100 favorable.
D) $200 unfavorable.

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, the actual price is $3.80 per pound ($3,800/1,000 pounds), and the standard price is $4 per pound. The variance is ($3.80 - $4.00) x 1,000 = $200 favorable.

A Company Developed the Following Per-Unit Standards for Its Product