Question

Thomas Company uses a standard cost system. Information for raw materials for Product RBI for the month of October follows: Standard unit price $1.75 Actual purchase price per unit $1.65 Actual quantity purchased 4,000 units Actual quantity used 3,900 units Standard quantity allowed for actual production 3,800 units What is the materials purchase price variance

Answer 1

Material price variance = $400

Step-by-step explanation:

A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite.

It is is computed as follows:

The material price variance

$

4000 units should have cost (4,000× 1.75) = 7,000

but did cost - actual cost (4,000× $1.65) = 6,600

Material price variance 400 favorable

Material price variance = $400