The following information is provided by the Atlas Company: $\begin{array}{ll}
\text { Actual direct material cost } & \$ 20,000 \
\text { Standard direct material cost } & \$ 24,000 \
\text { Direct material usage variance } & \$ 3,000 \text { favorable }
\end{array}$ What is the direct material price variance?
A) $1,000 favorable
B) $1,000 unfavorable
C) $5,000 unfavorable
D) Not enough information is provided

Question

The following information is provided by the Atlas Company: $\begin{array}{ll}
\text { Actual direct material cost } & \$ 20,000 \
\text { Standard direct material cost } & \$ 24,000 \
 \text { Direct material usage variance } & \$ 3,000 \text { favorable }
\end{array}$ What is the direct material price variance?
A) $1,000 favorable
B) $1,000 unfavorable
C) $5,000 unfavorable
D) Not enough information is provided

Quizplus · Accepted Answer

The direct material price variance is calculated as the difference between the actual cost and the standard cost for the actual quantity used. The total variance is $4,000 favorable ($24,000 - $20,000), and since the usage variance is $3,000 favorable, the price variance must be $1,000 favorable.

The Following Information Is Provided by the Atlas Company What Is the Direct Material Price Variance? A) $1,000 Favorable

The Following Information Is Provided by the Atlas Company What Is the Direct Material Price Variance?
A) $1,000 Favorable