Asked by Summer Bourbon on May 18, 2024
Verified
If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual is 800 units at $12, the direct materials price variance is $800 favorable.
Direct Materials Price Variance
The cost associated with the difference between the actual price and the standard price of direct materials multiplied by the actual quantity of direct materials used in producing a commodity.
Direct Materials
Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the production cost.
- Explain the concept of variance and its significance in managing costs and evaluating performance.
Verified Answer
BM
Brittany MacKeiganMay 18, 2024
Final Answer :
False
Explanation :
The direct materials price variance is calculated as (actual price - standard price) x actual quantity purchased. Using the given information, the calculation would be ($12 - $11) x 800 = $800 unfavorable, not favorable as stated in the statement.
Learning Objectives
- Explain the concept of variance and its significance in managing costs and evaluating performance.
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