Question

A company provided the following direct materials cost information. Compute the direct materials price variance.

Standard costs assigned:
Direct materials standard cost (410,000 units @ $3.90/unit)	$	1,599,000
Actual costs:
Direct Materials costs incurred (409,250 units @ $4.00/unit)	$	1,637,000

• $1,599,000 Favorable.

• $1,599,000 Unfavorable.

• $40,925 Unfavorable.

• $40,925 Favorable.

• $41,000 Favorable.

Answer 1

Correct Answer:

$ 40,925 Unfavourable

Working:

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        3.90	-	$                       4.00	)	x	409250
	-40925
	Variance		40925			Unfavourable-U

End of answer.

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