Scarlett Company has a direct material standard of 3 gallons of input at a cost of $5 per gallon. During July, Scarlett Company purchased and used 7,500 gallons. The direct material quantity variance was $750 unfavorable and the direct material price variance was $3,000 favorable. What price per gallon was paid for the purchases?
A) $5.00
B) $5.40
C) $4.60
D) $2.50

Question

Quizplus · Accepted Answer

The price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Given a $3,000 favorable variance, the actual price must be $4.60 per gallon.

Scarlett Company Has a Direct Material Standard of 3 Gallons