The Armstrong Corporation developed a flexible budget for its production process. Armstrong budgeted to use 10,000 pounds of direct material with a standard cost of $13 per pound to produce 10,000 units of finished product. Armstrong actually purchased 19,000 pounds and used 12,000 pounds of direct material with a cost of $29 per pound to produce 10,000 units of finished product. Given these results, what is Armstrong's direct material price variance?
A)$160,000 favorable
B)$160,000 unfavorable
C)$304,000 unfavorable
D)$304,000 favorable

Question

Quizplus · Accepted Answer

The direct material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Used. Here, it is ($29 - $13) x 12,000 = $192,000 unfavorable. However, the correct calculation should be based on the purchased quantity: ($29 - $13) x 19,000 = $304,000 unfavorable.

The Armstrong Corporation Developed a Flexible Budget for Its Production