Answer:
d. the actual usage of materials was less than the standard allowed.
Step-by-step explanation:
For evaluating the price or quantity variance, we do not take into consider the number of quantity purchased, instead we focus on the number of quantity actually being used for manufacturing the targeted unit. So, we can easily eliminate the first two options.
Now, as per the question, there was an unfavourable material price variance of $380. That means, the budgeted price for the material is less than the actual price for manufacturing the product. However, the third option exactly contradicts the above situation.
The correct option is (d), because the actual usage of material was less than the budgeted one, which gives the favourable quantity variance of $120.