Question

Summerlin company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. the company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. what is the direct materials price variance? $2,500 unfavorable. $450 unfavorable. $2,950 unfavorable. $2,550 unfavorable. $400 unfavorable.

Answer 1

Since there is an equal amount of units produced given to be 2,000 units, we solve for the direct materials price variance with the equation below.
(Standard price - Actual price) x Actual amount
= ($5.1 - $5) x 4,500 = $450

This is unfavorable for the company because it costs them more.