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17 March, 18:44

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

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  1. 17 March, 19:02
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    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
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