Hewlitt Company has gathered the following information about its purchase and use of raw materials for September: $\begin{array}{|l|c|}
\hline \text { Standard price per pound of raw material } & \$ 10.00 \
\hline \text { Actual purchase price per pound of raw material } &\$ 9.60 \
\hline \begin{array}{l}
\text { Standard quantity allowed for actual production } \
\text { (pounds) }
\end{array} & 900 \
\hline \text { Actual guantity of raw materials purchased (pounds) } & 1,000 \
\hline
\end{array}$
Hewlitt Company uses a standard cost system.What is the materials price variance?

Question

Hewlitt Company has gathered the following information about its purchase and use of raw materials for September: $\begin{array}{|l|c|}
\hline \text { Standard price per pound of raw material } & \$ 10.00 \
\hline \text { Actual purchase price per pound of raw material } &\$ 9.60 \
\hline \begin{array}{l}
\text { Standard quantity allowed for actual production } \
\text { (pounds) }
\end{array} & 900 \
\hline \text { Actual guantity of raw materials purchased (pounds) } & 1,000 \
\hline
\end{array}$
 Hewlitt Company uses a standard cost system.What is the materials price variance?

Quizplus · Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. Here, it is ($9.60 - $10.00) x 1,000 = -$400, which is a $400 favorable variance.

Hewlitt Company Has Gathered the Following Information About Its Purchase