Scarlett Company has a direct material standard of 3 gallons of input at a cost of $7 per gallon. During July, Sca lett Company purchased and used 7530 gallons. The direct material quantity variance was $210 unfavorable and the direct material price varlance was $3765 favorable. What price per gallon was paid for the purchases?

a. $4.40

b. $7.40

c. $700

d. $6.50

d. $6.50

Explanation:

In this question, we apply the direct material price variance which is shown below:

Direct material price variance = Actual Quantity * (Standard Price - Actual Price)

$3,765 = 7,530 gallons * ($7 - actual price)

$3,765 : 7,530 gallons = ($7 - actual price)

$0.5 = ($7 - actual price)

So, the actual price would be

= $7 - $0.5

= $6.50

All other information which is given is not relevant. Hence, ignored it