In the context of journal entries for standard costing, which variance is calculated using the formula: (actual cost per unit - standard cost per unit) \( \times \) actual quantity?

• A. Materials Price Variance
• B. Labor Rate Variance
• C. Overhead Volume Variance
• D. Materials Quantity Variance

Answer: (A)

Verified step by step guidance

1. Understand the concept of variances in standard costing: Variances are used to measure the difference between actual costs and standard costs, helping businesses identify areas of inefficiency or cost control issues.
2. Identify the formula provided in the problem: The formula is (actual cost per unit - standard cost per unit) × actual quantity. This formula calculates the difference in cost per unit and multiplies it by the actual quantity used.
3. Match the formula to the correct variance type: The formula specifically focuses on the cost per unit difference, which is related to the price paid for materials or labor. This indicates it is a price-related variance.
4. Eliminate incorrect options: Overhead Volume Variance and Materials Quantity Variance are not price-related variances. Overhead Volume Variance deals with fixed overhead costs and production levels, while Materials Quantity Variance focuses on the quantity of materials used rather than their price.
5. Conclude that the correct variance type is Materials Price Variance: This variance measures the difference between the actual price paid for materials and the standard price, multiplied by the actual quantity of materials used.