Keep It Safe, Inc., manufactures a popular protective case for mobile telephones. Each case requires 0.5 grams of a titanium alloy to provide necessary strength. The standard price of the alloy is $100 per gram. In the most recently concluded month, Keep It Safe purchased and used 2,000 grams of the alloy to produce 3,800 cases. The total cost of the alloy purchased was $210,000. What was the material price variance for the month?
A) $10,000 Unfavorable.
B) $10,000 Favorable.
C) $9,500 Favorable.
D) $9,500 Unfavorable.

Question

Quizplus · Accepted Answer

The material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The actual price per gram is $210,000 / 2,000 grams = $105. The variance is ($105 - $100) x 2,000 = $10,000 Unfavorable.