Question

Absolute Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year​ 1, Absolute collected the following information from its main production​ line:Actual quantity purchased 200 unitsActual quantity used 110 unitsUnits standard quantity 100 unitsActual price paid $8 per unitStandard price $10 per unitAbsolute isolates price variances at the time of purchase. What is the materials price variance for Year 1?a. $400 favorableb. $400 unfavorablec. $220 favorabled. $220 unfavorable

Answer 1

Direct material price variance= $400 favorable

Step-by-step explanation:

Giving the following information:

Actual quantity purchased 200 units

Actual price paid $8 per unit

Standard price $10 per unit

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

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

Direct material price variance= (10 - 8)*200

Direct material price variance= $400 favorable