Choice "C" is correct. Material A experienced a $1,300 favorable direct materials price variance for the current period. The materials price variance formula calculates out as follows:
Materials price variance |
Materials price variance.80 - 4.00) |
Materials price variance.300) |
The materials price variance is favorable since we spent less than standard. The trough method is computed as follows:
Actual quantity x
Actual price
| | Actual quantity x
Standard price
|
|---|
6,500 x $3.50 =
$24,700
|
←Price variance→
1,300
| 6,500 x $4.00
$26,000
|
Choice "d" is incorrect. The proposed answer uses standard vs. actual quantity.Choice "b" is incorrect. The proposed answer uses standard vs. actual quantity and is inappropriately evaluates the variance as unfavorable.Choice "a" is incorrect. The variance amount is correct; however, it is favorable, not unfavorable, per the above.
