A company purchases 20,000 pounds of materials. The materials price variance is $3,000 favorable. What is the difference between the standard and actual price paid for the materials?

Question

Quizplus · Accepted Answer

The materials price variance formula is: (standard price - actual price) x actual quantity purchased. We know that the variance is $3,000 favorable, which means the actual price paid is lower than the standard price. Since the variance is favorable, the actual price paid must be less than the standard price. We do not know the actual price paid or the actual quantity purchased, so we cannot solve for the standard price directly. However, we can use algebra to solve for the difference between the standard and actual price:

$3,000 = (standard price - actual price) x 20,000
$3,000/20,000 = (standard price - actual price)
$0.15 = (standard price - actual price)

Therefore, the difference between the standard and actual price is $0.15 per pound.

A Company Purchases 20,000 Pounds of Materials