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A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:______.
a. $520 unfavourable.
b. $400 unfavourable.
c. $120 favourable.
d. $520 favourable.
e. $400 favourable.

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Answer:

d. $520 favourable.

Explanation:

Calculation to determine what The direct materials price variance is:

Using this formula

Material Price variance= AQ(SP- AP)

Where,

Actual Quantity= 5200

Standard price= $2

Actual Price= $1.9

Let plug in the formula

Material Price variance=5200($2-$1.9)

Material Price variance=5200*$0.1

Material Price variance=$520 Favourable

Therefore The direct materials price variance is:$520 Favourable