During the month of March, Baker's Express purchased 10,000 pounds of flour at $1 per pound. At the end of March, Baker's Express found that it had a favorable materials price variance of $500. The standard cost per pound must be

Material price variance

= (Standard price - Actual price) x Actual quantity purchased

500 = (SP - $1.00) x 10,000

500 = 10,000SP - $10,000

$500 + $10,000 = 10,000SP

$10,500 = 10,000SP

$10,500 = SP

10,000

SP = $1.05

The standard cost per pound is $1.05

Explanation:

Material price variance is the difference between standard price and actual price multiplied by actual quantity purchased. The material price variance, actual price and actual quantity purchased have been given with the exception of standard price. Thus, standard price is made the subject of the formula, which implies that we are solving for standard price.