Information on Fleming Company's direct material costs follows: $\begin{array} { l c }
\text { Actual amount of direct materials purchased and used } & 20,000 \text { kilograms } \
\text { Actual direct material costs } & \$ 40,000 \
\text { Standard price of direct materials } & \$ 2.10 \text { per kilogram } \
\text { Direct materials quantity variance - favourable } & \$ 3,000
\end{array}$ What was the company's direct material price variance?
A) $1,000 favourable.
B) $1,000 unfavourable.
C) $2,000 favourable.
D) $2,000 unfavourable.

Question

Information on Fleming Company's direct material costs follows: $\begin{array} { l c } 
\text { Actual amount of direct materials purchased and used } & 20,000 \text { kilograms } \
\text { Actual direct material costs } & \$ 40,000 \
\text { Standard price of direct materials } & \$ 2.10 \text { per kilogram } \
\text { Direct materials quantity variance - favourable } & \$ 3,000
\end{array}$ What was the company's direct material price variance?
A) $1,000 favourable.
B) $1,000 unfavourable.
C) $2,000 favourable.
D) $2,000 unfavourable.

Quizplus · Accepted Answer

Direct material price variance is calculated using the following formula:

Direct Material Price Variance = (Actual Quantity Purchased x Actual Price) - (Actual Quantity Purchased x Standard Price)

Given:

Actual amount of direct materials purchased and used = 20,000 kilograms
Actual direct material costs = $40,000
Standard price of direct materials = $2.10 per kilogram
Direct materials quantity variance - favourable = $3,000

Actual Quantity Purchased x Actual Price = $40,000
Actual Quantity Purchased x Standard Price = (20,000 x $2.10) = $42,000

Direct Material Price Variance = ($40,000 - $42,000) = $2,000 favourable.

Therefore, the best choice is C.

Information on Fleming Company's Direct Material Costs Follows What Was the Company's Direct Material Price Variance? A) $1,000

Information on Fleming Company's Direct Material Costs Follows What Was the Company's Direct Material Price Variance?
A) $1,000