Max Company has developed the following standards for one of its products. The following activity occurred during the month of October:
The company records materials price variances at the time of purchase. The direct materials price variance is
A) $50,000 F.
B) $50,000 U.
C) $10,000 U.
D) $10,000 F.

Question

Max Company has developed the following standards for one of its products.  The following activity occurred during the month of October:
 The company records materials price variances at the time of purchase. The direct materials price variance is
A) $50,000 F. 
B) $50,000 U. 
C) $10,000 U. 
D) $10,000 F.

Quizplus · Accepted Answer

To calculate the direct materials price variance, we need to compare the actual price paid for materials with the standard price. The actual price paid for 25,000 pounds of materials is $240,000 ($9.60 per pound). The standard price is $10 per pound. 
Direct Materials Price Variance = (Actual Price - Standard Price) x Actual Quantity 
= ($9.60 - $10) x 25,000 
= $10,000 U (unfavorable)

Max Company Has Developed the Following Standards for One of Its