A computer chip is purchased to be used in the manufacture of a radio.The standard price of the computer chip is $50.00.During the month of January,2,240 computer chips were purchased and used.The materials price variance was $5,600 unfavorable.The standard number of computer chips allowed for the actual number of radios manufactured during the period was 31,000 chips.What was the actual purchase price of each computer chip?

Question

Quizplus · Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Given the variance is $5,600 unfavorable, we have ($P - $50) x 2,240 = $5,600. Solving for $P gives an actual price of $52.50 per chip.

A Computer Chip Is Purchased to Be Used in the Manufacture