The Porter Company has a standard cost system.In July,the company purchased and used 22,500 kilograms of direct material at an actual cost of $53,000,the materials quantity variance was $1,875 unfavourable,and the standard quantity of materials allowed for July production was 21,750 kilograms.What was the materials price variance for July?
A) $2,725 favourable.
B) $2,725 unfavourable.
C) $3,250 favourable.
D) $3,250 unfavourable.

Question

Quizplus · Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. First, find the standard cost: Standard Quantity = 21,750 kg, Actual Quantity = 22,500 kg, Quantity Variance = (22,500 - 21,750) x Standard Price = $1,875 unfavourable. Solving for Standard Price gives $0.75/kg. Actual Price = $53,000 / 22,500 kg = $2.36/kg. Price Variance = (2.36 - 0.75) x 22,500 = $3,250 favourable.

The Porter Company Has a Standard Cost System