A. A difference between the quantity of materials purchased and used has nothing to do with a favorable materials purchase price variance of $380 and an unfavorable materials quantity variance of $120. The materials efficiency variance is the difference between the actual quantity of material used and the standard quantity of material allowed for the actual output, multiplied by the standard price. The materials purchaseprice variance uses the actual quantity of materials purchased instead of the quantity of materials used.
B. A favorable materials purchase price variance of $380 indicates that the actual price was less than the standard price. We also can prove it by using the price variance formula to calculate the actual price. The price variance is calculated as follows: (Actual Price - Standard Price) × Actual Quantity. The standard specifications for one unit of Titactium include 6 pounds of materials at $.30 per pound. Actual production was 3,100 units of Titactium.
((AP * 6) - (.30 × 6)) × 3,100 = (380)
(6AP - 1.80) × 3,100 = (380)
18,600AP - 5,580 = (380)
18,600AP = 5,200
AP = $.28
The standard price was $.30, so the actual price of $.28 was lower than the standard price.
C. An unfavorable materials quantity variance of $120 indicates that more materials were used than the standard allowed, not less.
D. A difference between the quantity of materials purchased and used has nothing to do with a favorable materials purchase price variance of $380 and an unfavorable materials quantity variance of $120. The materials efficiency variance is the difference between the actual quantity of material used and the standard quantity of materials allowed multiplied by the standard price. The materials purchase price variance uses the actual quantity of materials purchased instead of the quantity of materials used.
