The following materials standards have been established for a particular product:
$\begin{array}{|l|r|}
\hline \text { Standard quantity per unit of output } & 8.3 \text { grams } \
\hline \text { Standard price } & \$ 19.15 \text { per gram } \
\hline
\end{array}$
The following data pertain to operations concerning the product for the last month:
$\begin{array}{|l|r|}
\hline \text { Actual materials purchased } & 7,500 \text { grams } \
\hline \text { Actual cost of materials purchased } & \$ 141,375 \
\hline \text { Actual materials used in production } & 7,100 \text { grams } \
\hline \text { Actual output } & 700 \text { units } \
\hline
\end{array}$
What was the materials price variance for the month?
A) $2,250 favourable.
B) $7,540 unfavourable.
C) $7,660 unfavourable.
D) $24,317 unfavourable.

Question

Quizplus · Accepted Answer

The materials price variance is calculated as the difference between the actual cost of materials purchased and the standard cost of materials used. The standard cost of materials used is calculated as the standard quantity per unit of output multiplied by the actual output. In this case, the standard quantity per unit of output is 8.3 grams, the actual output is 700 units, and the standard cost of materials used is 8.3 grams * 700 units = 5,810 grams. The actual cost of materials purchased is $141,375. Therefore, the materials price variance is $141,375 - (5,810 grams * $19.15 per gram) = $2,250 favourable.

The Following Materials Standards Have Been Established for a Particular