Question

Scarlett Company has a direct material standard of 3 gallons of input at a cost of $7 per gallon. During July, Sca lett Company purchased and used 7530 gallons. The direct material quantity variance was $210 unfavorable and the direct material price varlance was $3765 favorable. What price per gallon was paid for the purchases?
a. $4.40
b. $7.40
c. $700
d. $6.50

Answer 1

Answer:

d. $6.50

Explanation:

In this question, we apply the direct material price variance which is shown below:

Direct material price variance = Actual Quantity × (Standard Price - Actual Price)

$3,765  =  7,530 gallons × ($7 - actual price)

$3,765 ÷ 7,530 gallons =  ($7 - actual price)

$0.5 = ($7 - actual price)

So, the actual price would be

= $7 - $0.5

= $6.50

All other information which is given is not relevant. Hence, ignored it