Question

A company has a materials price standard of $2.00 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 6,000 pounds, although the standard quantity allowed for the output was 5,400 pounds. What is the company’s materials price variance? *

Answer 1

Answer:

$ 1,200  unfavorable

Explanation:

Given that,

materials price standard = $2.00 per pound

materials were purchased = 6,000 pounds

standard quantity allowed for the output = 5,400 pounds

The materials price variance:

= Actual Quantity × (Actual Price - Standard Price)

= 6,000 Pounds × ($2.20 - $2.00)

= $ 1,200  unfavorable

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

Hence the correct answer is $ 1,200 U