Which of the following formulas is used to calculate the materials price variance? a. (Actual Price * Actual Quantity) - (Standard Price * Standard Quantity) b. (Actual Price * Actual Quantity) - (Standard Price * Actual Quantity) c. (Variable Price * Actual Quantity) - (Total Price * Actual Quantity) d. (Fixed Price * Average Quantity) - (Standard Price * Actual Quantity) e. None of these choices are correct.

Question

Paola Hester

Business

10 October, 17:24

Which of the following formulas is used to calculate the materials price variance? a. (Actual Price * Actual Quantity) - (Standard Price * Standard Quantity) b. (Actual Price * Actual Quantity) - (Standard Price * Actual Quantity) c. (Variable Price * Actual Quantity) - (Total Price * Actual Quantity) d. (Fixed Price * Average Quantity) - (Standard Price * Actual Quantity) e. None of these choices are correct.

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Answers (1)

Know the Answer?

Eli Grant · Answer 1

b. (Actual Price * Actual Quantity) - (Standard Price * Actual Quantity)

Explanation:

The material price variance shows how favourable or otherwise the actual material price is compared to the standard price. Where the actual material price is higher than the standard price, it results in an unfavorable variance and when the standard price is higher than the actual price, it results in a favourable variance.

The formula for the material price variance

= (Actual price - Standard price) * Actual quantity

= (Actual price * Actual quantity) - (Standard price * Actual quantity)

Hence the right option is b.