The formula to compute direct materials price variance is to calculate the difference between
A) actual costs - (actual quantity * standard price)
B) actual cost + standard costs
C) actual cost - standard costs
D) (actual quantity * standard price) -standard costs

Question

Quizplus · Accepted Answer

The formula to compute direct materials price variance is (actual quantity * standard price) - actual costs. This calculates the difference between the actual costs incurred for the materials and the expected or standard cost (based on the standard price) for the same quantity of materials. If the actual cost is higher than the standard cost, then the result will be a negative variance indicating that the company paid more than anticipated for the materials. If the actual cost is lower than the standard cost, then the result will be a positive variance indicating that the company saved money on the materials. Therefore, option A is the correct answer.

The Formula to Compute Direct Materials Price Variance Is to Calculate