The materials price variance is calculated using the:

• A. difference between the actual price and the standard price, multiplied by the standard quantity allowed
• B. difference between the actual price and the standard price, multiplied by the actual quantity purchased
• C. difference between the actual quantity used and the standard quantity allowed, multiplied by the standard price
• D. difference between the actual quantity purchased and the standard quantity allowed, multiplied by the actual price

Answer: (B)

Verified step by step guidance

1. Understand the concept of materials price variance: It measures the difference between the cost of materials at the actual price and the cost of materials at the standard price, based on the quantity purchased.
2. Identify the formula for materials price variance: The formula is (Actual Price - Standard Price) × Actual Quantity Purchased.
3. Break down the components: 'Actual Price' refers to the price paid per unit of material, 'Standard Price' is the predetermined cost per unit, and 'Actual Quantity Purchased' is the total quantity of materials bought during the period.
4. Clarify why the formula uses 'Actual Quantity Purchased': This ensures the variance reflects the actual cost impact based on the quantity bought, not the quantity used or allowed.
5. Apply the formula step-by-step: Subtract the Standard Price from the Actual Price to find the price difference, then multiply this difference by the Actual Quantity Purchased to calculate the materials price variance.