Question

Which of the following formulas is used to calculate thematerials price variance? a. (Actual price...

Which of the following formulas is used to calculate the materials price variance? 


a. (Actual price × Actual quantity) – (Standard price × Actual quantity) 

b. (Actual price × Actual quantity) – (Standard price × Standard quantity) 

c. (Fixed price × Average quantity) – (Standard price × Actual quantity) 

d. (Variable price × Actual quantity) – (Total price × Actual quantity) 

e. None of these choices are correct.

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Answer #1

The correct answer is:

a. (Actual price × Actual quantity) – (Standard price × Actual quantity)

Notes

Simply put = AQ*AP - AQ*SP

Direct material price variance is the variance caused due to difference between standard and actual price.

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