Consider the following information: Direct material purchased and used: 80,000 gallons
Standard quantity of direct material allowed for May production: 76,000 gallons
Actual cost of direct materials purchased and used: $176,000
Unfavourable direct-material quantity variance: $9,400
The direct-material price variance is:

Question

Quizplus · Accepted Answer

The direct-material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The total cost of materials is $176,000 for 80,000 gallons, so the actual price per gallon is $2.20. The standard quantity allowed is 76,000 gallons, and the unfavorable quantity variance is $9,400, meaning the standard cost for 80,000 gallons is $166,600. Therefore, the standard price per gallon is $2.075. The price variance is (2.20 - 2.075) x 80,000 = $12,000 favorable.

Consider the Following Information: Direct Material Purchased and Used: 80,000