Mystic Falls Inc. Mystic Falls Inc. bottles and sells a popular soft drink. In 2011, the company had expected to sell 1,000,000 bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 ounces at a cost of $.04 per ounce. During 2011, 10,000,000 ounces of material were purchased out of which 9,200,000 ounces were used at a cost of $.05 per ounce.
Refer to the Mystic Falls Inc. information above. The direct materials price variance for 2011 was:
A) $ 92,000 U.
B) $ 92,000 F.
C) $100,000 U.
D) $100,000 F.

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. Here, (0.05 - 0.04) x 10,000,000 = $100,000 Unfavorable.