A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was

a. 5,700 Favorable

b. $300 Favorable

c. $150 Favorable

d. $300 unfavorable

b. $300 Favorable

Explanation:

The computation of the material price variance is shown below:

= Actual Quantity * (Standard Price - Actual Price)

= 1,500 pounds * ($19.30 - $5,700 : 1,500 pounds)

= 1,500 pounds * ($4 - $3.8)

= 1,500 pounds * $0.2

= $300 favorable

We simply take the difference of the prices and then multiplied it by the actual quantity so that the correct amount can be calculated