A is corrent. The requirement is to calculate the materials price variance for May. The materials price variance is equal to (Actual quantity x Actual price) - (Actual quantity x Standard cost) and the materials usage variance is equal to (Actual quantity x Standard price) - (Standard quantity x Standard price). Since the standard quantity for May was 17,000 and the actual quantity was 17,500, the excess quantity used was 500 units (17,000 - 17,500). Therefore, the standard cost is $5.00 per unit ($2,500 unfavorable usage variance ÷ 500 excess units used), and the price variance is $17,500 favorable [$70,000 actual cost - (17,500 actual quantity used x $5.00 standard unit cost)].
B is incorrect because it indicates that the variance is unfavorable and this is incorrect because actual cost is less than standard cost.
C is incorrect because it calculates the variance as the difference between actual cost and standard usage at standard price.
D is incorrect. It calculates the variance as the difference between actual cost and standard usage at standard price and mischaracterizes the variance as unflavorable.
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