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In manufacturing its product, City Manufacturing's recipe requires 3 ounces of Material X at a standard cost of $0.20 per ounce. During January 2010, City bought and used 2,000 ounces of Material X at a cost of $0.18 per ounce and made 700 units of product. The company has estimated that it will produce 750 units of product per month.
-What is City's material price variance?

Question

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In manufacturing its product, City Manufacturing's recipe requires 3 ounces of Material X at a standard cost of $0.20 per ounce. During January 2010, City bought and used 2,000 ounces of Material X at a cost of $0.18 per ounce and made 700 units of product. The company has estimated that it will produce 750 units of product per month.
-What is City's material price variance?

Quizplus · Accepted Answer

The material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, it is ($0.18 - $0.20) x 2,000 ounces = -$0.02 x 2,000 = $40 favorable.

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