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What is the formula for calculating the direct materials price variance?

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Question: What is the formula for calculating the direct materials price variance?

Options:

  1. (Actual Price - Standard Price) x Actual Quantity
  2. (Standard Price - Actual Price) x Standard Quantity
  3. (Actual Quantity - Standard Quantity) x Standard Price
  4. (Standard Quantity - Actual Quantity) x Actual Price

Correct Answer: (Actual Price - Standard Price) x Actual Quantity

Solution: 

The direct materials price variance is calculated using the formula: (Actual Price - Standard Price) x Actual Quantity.

What is the formula for calculating the direct materials price variance?

Practice Questions

Q1
What is the formula for calculating the direct materials price variance?
  1. (Actual Price - Standard Price) x Actual Quantity
  2. (Standard Price - Actual Price) x Standard Quantity
  3. (Actual Quantity - Standard Quantity) x Standard Price
  4. (Standard Quantity - Actual Quantity) x Actual Price

Questions & Step-by-Step Solutions

What is the formula for calculating the direct materials price variance?
  • Step 1: Identify the Actual Price of the direct materials you purchased.
  • Step 2: Identify the Standard Price of the direct materials that was expected or budgeted.
  • Step 3: Determine the Actual Quantity of direct materials that you purchased.
  • Step 4: Subtract the Standard Price from the Actual Price to find the price difference.
  • Step 5: Multiply the price difference by the Actual Quantity to calculate the direct materials price variance.
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