Question

A company uses 10000 pounds of materials for which it paid $2 a pound. The materials price variance was $5000 unfavorable. What is the standard price per pound?

Answer 1

$1.5 per pound

Step-by-step explanation:

The computation of the material price variance is shown below:

Material price variance = Actual Quantity × Actual Price - Actual Quantity × Standard Price

$5,000 = 10,000 pounds × $2 - 10,000 pounds × Standard price

$5,000 = $20,000 - 10,000 pounds × Standard price

So, the standard price would be

= $15,000 ÷ 10,000 pounds

= $1.5 per pound