Answer (C) is correct . The direct materials price variance, when it is isolated early, is calculated as the quantity purchased times the standard price minus the actual price (this firm has decided that waiting until the quantity actually used is known delays the usefulness of the calculation). The calculation is therefore [500,000 × ($2.00 – $2.02)] = $10,000 unfavorable.
Answer (A) is incorrect because The expected quantity (the actual units produced times the standard inputs per unit of output) times the standard price minus the actual price, an undefined variance, equals $9,600 unfavorable.
Answer (B) is incorrect because Using the quantity consumed instead of the quantity purchased results in $9,800 unfavorable.
Answer (D) is incorrect because The quantity (efficiency) variance is $20,000 unfavorable.
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