US CMA Part 1 · Chapter 3 · Question 5 of 30
Brightline Co. purchased 50,000 pounds of material for $3.12 per pound. The standard price is $3.00 per pound, and the company isolates the price variance at the time of purchase. What is the direct materials price variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $6,000 unfavorable
Explanation
Price variance = (actual price - standard price) x actual quantity purchased = ($3.12 - $3.00) x 50,000 = $6,000 unfavorable. Because the variance is isolated at purchase, the quantity purchased (not the quantity used) is the base.
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