Question

Baskets Inc. gathered the following actual results for the current​ month:

Actual​ amounts:
Units produced
​5,200
Direct materials purchased and used​ (7,300 lbs.)
​$29,200

Budgeted production and standard costs​ were:

Budgeted production
​4,800 units
Direct materials
1.5​ lbs/unit at​ $3/lb.

What is the direct materials price​ variance?

Answer 1

Direct Materials Price Variance = Actual Quantity * ( Actual Price - Standard Price)

= (Actual Quantity * Actual Price) - (Actual Quantity *  Standard Price))

= $ 29,200 - ( 7,300 lbs * $ 3 Per Lb)

= $ 29,200 - $ 21,900

= $ 7,300

Since the Actual Price is more than the Standard Price, the variance is unfavorable

Hence the correct answer is $7,300 U