Which of the following best describes the formula \((\text{actual cost per unit} - \text{standard cost per unit}) \times \text{actual quantity}\)?

• A. Materials quantity variance
• B. Materials price variance
• C. Accumulated depreciation
• D. Depreciation expense

Answer: (B)

Verified step by step guidance

1. Understand the formula: The formula $({\mathrm{actual}}_{\mathrm{cost}}-{\mathrm{standard}}_{\mathrm{cost}})\times {\mathrm{actual}}_{\mathrm{quantity}}$ compares the actual cost per unit to the standard cost per unit and multiplies the difference by the actual quantity. This formula is used to calculate variances in cost accounting.
2. Identify the type of variance: The formula specifically measures the difference in cost per unit (price) rather than the quantity of materials used. This indicates that the formula is related to a price variance rather than a quantity variance.
3. Clarify the concept of 'Materials Price Variance': Materials price variance is the difference between the actual cost of materials and the standard cost of materials, multiplied by the actual quantity purchased. It helps businesses understand if they are paying more or less for materials than expected.
4. Eliminate incorrect options: 'Materials quantity variance' measures the difference in the quantity of materials used, not the price. 'Accumulated depreciation' and 'Depreciation expense' are unrelated to cost variances and pertain to fixed asset accounting.
5. Conclude the correct answer: Based on the formula and its purpose, the correct description is 'Materials price variance,' as it focuses on the cost per unit difference multiplied by the actual quantity.