Question

A company’s materials price variance would be favorable if:

	a.	the company purchased a smaller quantity of materials than originally planned.
	b.	the actual price paid for materials was less than the standard price for materials.
	c.	the actual quantity of materials used in production was less than the standard quantity allowed for the company’s actual output.
	d.	the company purchased a larger quantity of materials than originally planned.

Answer 1

Materials price variance = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

a. Materials price variance is not related to the quantity purchased, it is related to the actual price paid and the standard price.

c. It is related to the materials quantity variance.

d. It is neither related to materials price variance nor materials quantity variance.

The answer is Option b.