What is the direct materials price variance given actual materials cost $17,280 for 18,000 pounds and standard price $1.00 per pound?

What is the direct materials price variance given actual materials cost $17,280 for 18,000 pounds and standard price $1.00 per pound?

• A. $720 U
• B. $720 F
• C. $0
• D. $1,000 F

Answer: (B)

Direct materials price variance measures whether the actual cost per unit is higher or lower than the standard price, applied to the actual quantity used. Actual price per pound = 17,280 / 18,000 = 0.96. Difference from standard price (0.96 − 1.00) = −0.04 per pound. Variance = −0.04 × 18,000 = −720. A negative variance means spending less than the standard, so it’s $720 favorable. The amount differs from the other options because they either imply the wrong sign or the wrong magnitude.

Direct materials price variance measures whether the actual cost per unit is higher or lower than the standard price, applied to the actual quantity used.

Actual price per pound = 17,280 / 18,000 = 0.96.

Difference from standard price (0.96 − 1.00) = −0.04 per pound.

Variance = −0.04 × 18,000 = −720.

A negative variance means spending less than the standard, so it’s $720 favorable. The amount differs from the other options because they either imply the wrong sign or the wrong magnitude.