Which of the following is the correct formula for the materials price variance?
A) (Actual price of input - Budgeted price of input) x Budgeted quantity of input
B) (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted price of input
C) (Actual price of input - Budgeted price of input) x Actual quantity of input
D) (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Actual price of input

Question

Quizplus · Accepted Answer

The materials price variance measures the difference between the actual cost paid for materials and the budgeted cost of materials. Therefore, the correct formula is (actual price of input - budgeted price of input) multiplied by the actual quantity of input used. Choice A is the formula for the materials cost variance, which measures the difference between the actual cost of materials used and the budgeted cost of materials. Choice B is the formula for the materials usage variance, which measures the difference between the actual quantity of materials used and the budgeted quantity of materials allowed for the actual output. Choice D is not a valid formula for any variance.

Which of the Following Is the Correct Formula for the Materials