The following information is provided by the Atlas Company: $$\begin{array} { l l }
\text { Actual direct material cost } & \$ 20,000 \
\text { Standard direct material cost } & \$ 24,000 \
\text { Direct material usage variance } & \$ 3,000 \text { favorable }
\end{array}$$ What is the direct materials 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: $$\begin{array} { l l } 
\text { Actual direct material cost } & \$ 20,000 \
\text { Standard direct material cost } & \$ 24,000 \
\text { Direct material usage variance } & \$ 3,000 \text { favorable }
\end{array}$$ What is the direct materials 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 materials price variance can be calculated by subtracting the actual direct material cost from the standard direct material cost and then adjusting for the usage variance. Here, 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 Materials Price Variance? A) $1,000 Favorable

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