Question

A company purchases 20,000 pounds of materials. The materials price variance is $4,000 favorable. What is the difference between the standard and actual price paid for the materials

Answer 1

To find the difference between the standard and actual price per pound of materials, we use the materials price variance which is calculated as (Standard Price - Actual Price) x Actual Quantity. With a favorable variance of $4,000 for 20,000 pounds of materials, the difference between the standard and actual price is $0.20 per pound.

Step-by-step explanation:

The question asks for the difference between the standard and actual price paid for materials given a materials price variance that is $4,000 favorable. To calculate this, we need to know that materials price variance is calculated as (Standard Price - Actual Price) x Actual Quantity. A favorable variance means that the actual price is less than the standard price.

Given that the variance is $4,000 favorable, we can set up the equation as follows:

(Standard Price - Actual Price) x 20,000 pounds = $4,000

Standard Price - Actual Price = $4,000 / 20,000 pounds

Standard Price - Actual Price = $0.20 per pound

The difference between the standard price and the actual price is $0.20 per pound.

Answer 2

The actual price was $0.2 lower than the standard price.

Step-by-step explanation:

Giving the following information:

A company purchases 20,000 pounds of materials. The materials price variance is $4,000 favorable.

To calculate the direct material price difference, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

4,000 = (direct material price difference)*20,000

$0.2= direct material price difference

The actual price was $0.2 lower than the standard price.