Joiner Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as:

Question

Quizplus · Accepted Answer

The direct-material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. Here, it is ($5.60 - $6.00) x 25,000 = $0.40 x 25,000 = $10,000 favorable (F).

Joiner Corporation Recently Purchased 25,000 Gallons of Direct Material at $5.60