Consider the following information:
Direct material purchased and used, 80,000 gallons
Standard quantity of direct material allowed for May production, 76,000 gallons
Actual cost of direct materials purchased and used, $176,000
Unfavorable direct-material quantity variance, $9,400
The direct-material price variance is:
A) $11,400F.
B) $11,400U.
C) $12,000F.
D) $12,000U.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

The direct-material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard cost for 80,000 gallons is $166,600 ($176,000 - $9,400). The standard price per gallon is $166,600 / 80,000 = $2.0825. The actual price per gallon is $176,000 / 80,000 = $2.20. The price variance is ($2.0825 - $2.20) x 80,000 = $12,000 favorable (F).

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