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
a. $17,100 favorable.
b. $450 favorable.
c. $900 favorable.
d. $900 unfavorable.

Answer 1

Answer:

Direct material price variance= $1,200 favorable

Explanation:

Giving the following information:

Standard price= $8 per gallon

Last month, 3,000 gallons of direct materials were purchased for $22,800.

To calculate the direct material price variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Actual price= 22,800/3,000= $7.6 per gallon

Direct material price variance= (8 - 7.6)*3,000= $1,200 favorable