COST ACCOUNTING
STANDARD COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The formula for the direct materials price variance is
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(AP × SQ)-(SP × SQ)
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(AP × AQ)-(AQ × SP)
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(AP × AQ)-(SP × SQ)
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(AP × SQ)-(AP × SQ)
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Explanation:
Detailed explanation-1: -Direct Material Cost Variance = Standard cost of direct materials specified for actual output achieved-Actual cost of direct materials used. The standard cost of direct material is: Standard quantity of direct materials x Standard price per unit of direct materials.
Detailed explanation-2: -Vmp = (Actual Quantity Purchased * Actual Unit Cost)-(Actual Quantity Purchased * Standard Unit Cost). When the Actual Materials Price is higher than the Standard Materials Price, the variance is said to be unfavorable, since the Actual price paid on materials purchased is greater than the allowed standard.
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