If the standard quantity (SQ), actual quantity (AQ), standard price (SP), and actual price (AP) are

350
units, 400 units, $12, and $13 respectively, then the total budget variance is

$1,000 unfavorable

SUPPORTING CALCULATIONS: Total budget variance = (AQ × AP) − (SQ × SP) = (400 units × $13) − (350
units × $12) = $1,000 unfavorable

Which of the following equations measures a price variance?

. AQ × (AP − SP)

The usage variances focus on the difference between

actual quantity used and standard quantity allowed for actual production.

During June, 16,000 pounds of materials were purchased at a cost of $6 per pound. If there was a
favorable direct materials price variance of $3,000 in June, the standard cost per pound must be

$6.19

SUPPORTING CALCULATIONS: Standard cost for actual purchases made = (Actual quantity purchased ×
Actual price paid per unit purchased) + Favorable direct materials price variance = (16,000 pounds × $6)
+ $3,000 = $99,000 Standard cost per pound = Standard cost for actual purchases made / Actual quantity
purchased = $99,000 / 16,000 pounds = $6.19

Price/rate variances focus on the differences between

actual and standard unit prices of an input multiplied by the actual quantity of inputs

Firecracker Company has developed the following standards for one of its products. Direct materials: 15
pounds × $16 per pound Direct labor: 4 hours × $24 per hour Variable manufacturing overhead: 4 hours
× $14 per hour The following activity occurred during the month of October: Materials purchased:
10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor:
2,300 hours at $23.60/hour Actual variable manufacturing overhead: $30,000 The company records
materials price variances at the time of purchase. The direct materials price variance is

$10,000 unfavorable

SUPPORTING CALCULATIONS: $170,000 − (10,000 × $16) = $10,000 unfavorable