Commercial Pilot Licence (CPAER) – Canada · Question
A company budgeted to purchase 1,000 kg of direct materials at $10.00/kg. It actually purchased and used 1,050 kg at a cost of $9.50/kg. What is the direct material price variance?
Direct material price variance = (Actual Price - Standard Price) x Actual Quantity Purchased. = ($9.50 - $10.00) x 1,050 kg = - $0.50 x 1,050 kg = $(525) or $52
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Question: A company budgeted to purchase 1,000 kg of direct materials at $10.00/kg. It actually purchased and used 1,050 kg at a cost of $9.50/kg. What is the direct material price variance?
Answer options: ✅ $525 favourable.
- $500 unfavourable.
- $525 unfavourable.
- $ $(500) favourable.
Correct answer: $525 favourable.
Explanation: Direct material price variance = (Actual Price - Standard Price) x Actual Quantity Purchased. = ($9.50 - $10.00) x 1,050 kg = - $0.50 x 1,050 kg = $(525) or $525 Favourable.
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