CAF-5 · Chapter 11 · Question 2 of 10
A company's standard material price is Rs. 8.00 per kg. During the month, it purchased and consumed 50,000 kgs of material at an actual price of Rs. 7.80 per kg. What is the direct material price variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 10,000 Favourable
Explanation
Material Price Variance = (Standard Price – Actual Price) × Actual Quantity. Calculation: (Rs. 8.00 – Rs. 7.80) × 50,000 kgs = Rs. 0.20 × 50,000 = Rs. 10,000. Because the actual price paid was less than the standard price, the variance is Favourable.
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