During December, 6,000 pounds of raw materials were purchased at a cost of £16 per pound. If there was an unfavourable materials price variance of £6,000 for December, the standard cost per pound must be
A)£17.
B)£16.
C)£15.
D)none of the above.

Question

Quizplus · Accepted Answer

The materials price variance is calculated as (actual price - standard price) x actual quantity. We know the actual quantity purchased was 6,000 pounds and the materials price variance was unfavourable for £6,000. Therefore:

-6,000 = (16 - standard price) x 6,000 
-6,000 = 96,000 - 6,000(standard price) 
6,000(standard price) = 102,000 
Standard price = £17

Therefore, the standard cost per pound must be £17.

During December, 6,000 Pounds of Raw Materials Were Purchased at a Cost