Anniversary Roses uses a special mix of compost to fortify the soil around their plants. The price standard used is $4.00 per sack of compost. During the year, the purchase price averaged $3.80 per sack. The business purchased and used 1540 sacks of compost during the year. Compute the direct materials price variance indicating whether it is favourable or unfavourable.

Question

Quizplus · Accepted Answer

The direct materials price variance is calculated as (Standard Price - Actual Price) x Actual Quantity. Here, it is ($4.00 - $3.80) x 1540 = $308, which is favorable (F) because the actual price is less than the standard price.

Anniversary Roses Uses a Special Mix of Compost to Fortify