ECONOMICS

Detailed explanation-1: -If the actual purchases price for material exceeds the standard purchase price, then the journal entry to record the Direct Materials Price Variance would be a credit. An unfavorable labor rate variance is recorded as a debit in the Labor Rate Variance account.

Detailed explanation-2: -The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period. When the actual price paid on the credit for raw material exceeds its standard price, the journal entry would include debit Material Price variance.

Detailed explanation-3: -If more materials were used than the standard quantity, or if a price greater than the standard price was paid, the variance is unfavorable. If the reverse is true, the variance is favorable.

Detailed explanation-4: -If there is no difference between the standard price and the actual price paid, the outcome will be zero, and no price variance exists. If the actual price paid per unit of material is lower than the standard price per unit, the variance will be a favorable variance.

Detailed explanation-5: -Causes of the Materials Price Variance Market-driven pricing changes, such as changes in the prices of commodities. Bargaining power changes by suppliers, who may be able to impose higher prices than expected. Buying in unusually large or small volumes in comparison to what was expected when the standard was created.