Which formula correctly represents the direct materials price variance?

Which formula correctly represents the direct materials price variance?

• A. AQ × (AP − SP)
• B. AQ × (SP − AP)
• C. (AP − SP) × AQ
• D. SP × AQ

Answer: (A)

Direct materials price variance measures how much the cost changes because you paid a different price per unit than planned. It uses the actual quantity purchased and the difference between the actual price per unit and the standard price per unit. The correct form is AQ × (AP − SP) because you multiply how many units you bought (AQ) by how much the price per unit differed from the standard (AP − SP). If AP is higher than SP, the variance is unfavorable; if AP is lower, it’s favorable. This expression is the same as (AP − SP) × AQ since multiplication is commutative. Using SP × AQ would only equal the standard cost for the actual quantity, not the variance itself, and reversing the difference (SP − AP) would flip the sign.

Direct materials price variance measures how much the cost changes because you paid a different price per unit than planned. It uses the actual quantity purchased and the difference between the actual price per unit and the standard price per unit. The correct form is AQ × (AP − SP) because you multiply how many units you bought (AQ) by how much the price per unit differed from the standard (AP − SP). If AP is higher than SP, the variance is unfavorable; if AP is lower, it’s favorable. This expression is the same as (AP − SP) × AQ since multiplication is commutative. Using SP × AQ would only equal the standard cost for the actual quantity, not the variance itself, and reversing the difference (SP − AP) would flip the sign.