Cabot Company collected the following data regarding production of one of its products. Compute the direct materials price variance.
A) $2,430 unfavorable.
B) $3,570 unfavorable.
C) $2,430 favorable.
D) $6,000 unfavorable.
E) $3,570 favorable.

Question

Quizplus · Accepted Answer

Direct materials price variance = (Actual price - Standard price) x Actual quantity
In the absence of actual price, we can use the difference between actual cost and standard cost which is given as $2,430 favorable. 
Since the actual cost is lower than the standard cost, it means the actual price is lower than the standard price, resulting in a favorable variance. Therefore, the answer is C) $2,430 favorable.

Cabot Company Collected the Following Data Regarding Production of One