Question

The formula for the materials price variance is

1)(AQ × SP) - (SQ × SP).
2)(AQ × AP) - (AQ × SP).
3)(AQ × AP) - (SQ × SP).
4)(AQ × SP) - (SQ × AP).

Answer 1

The materials price variance is calculated using the formula (AQ × AP) - (SQ × SP), which helps businesses determine if they have spent more or less on materials than anticipated based on the standard costs.

Step-by-step explanation:

The correct formula for calculating the materials price variance is (AQ × AP) - (SQ × SP), where AQ is the actual quantity of material used, AP is the actual price per unit, SQ is the standard quantity allowed for actual production, and SP is the standard price per unit.

Using the formula, we can determine how much more or less money has been spent on materials than was expected, based on the standard cost. If the result is negative, it means that the materials cost more than expected (unfavorable variance), and if it is positive, it means the materials cost less than expected (favorable variance).