During May, 6,000 pounds of raw materials were purchased at a cost of £2.60 per pound. If there was a favorable materials price variance of £900 for December, the standard cost per pound must be
A) £2.75
B) £2.60
C) £2.45
D) none of the above

Question

Quizplus · Accepted Answer

The favorable materials price variance indicates that the actual cost was less than the standard cost. The actual cost was £2.60 per pound for 6,000 pounds, totaling £15,600. A favorable variance of £900 means the standard cost was higher than the actual cost. To find the standard cost per pound, add the variance (£900) to the total actual cost (£15,600) and divide by the quantity (6,000 pounds). This calculation gives a standard cost of £2.75 per pound.

During May, 6,000 Pounds of Raw Materials Were Purchased at a Cost