Question

A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month, 3,000 gallons of direct materials were purchased for $22,800. The direct materials price variance for last month was Question 18 options: $22,800 favorable $600 favorable $1,200 favorable $1,200 unfavorable

Answer 1

Answer:

$1,200 favorable

Explanation:

Given,

Standard unit price for direct materials, SP = $8 per gallon

Actual direct materials price, AP = $22,800

Actual number of direct materials, AQ = 3,000 gallons

Actual unit price for direct materials = Actual direct materials price ÷ Actual number of direct materials

Actual unit price for direct materials = $22,800 ÷ 3,000 gallons

Actual unit price for direct materials = $7.6 per gallon

We know,

Direct Material Price Variance  = (SP − AP ) × AQ

Direct Material Price Variance  = $(8 - 7.6) × 3,000 gallons

Direct Material Price Variance  = $1,200 favorable