Question

Last year the price for thermometer covers in a pediatrician’s office was $0.06 each. This year, the covers cost $0.08 each. If the office purchased 100,000 thermometer covers this year, what is the price variance?

Is it a favorable or unfavorable variance?

Please show all of your work to receive credit.

Answer 1

Solution:-

Price Variance = (Actual cost incurred – Standard cost) * Actual quantity of units produced

                          = (0.08 – 0.06) * 100,000 Units

                         = 0.02 * 100,000 Units

                         = $2,000

Hence, Price Variance is $2000 and it is Unfaourable Balance.

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