Scarlett Company has a direct material standard of 3 gallons

Scarlett Company has a direct material standard of 3 gallons of input at a cost of $7 per gallon. During July, Scarlett Company purchased and used 7,530 gallons. The direct material quantity variance was $350 unfavorable and the direct material price variance was $3,765 favorable. What price per gallon was paid for the purchases?

Solution

In the following formula, AQ is actual quantity, AP is actual price, and SP is standard price.

SP = $7 per gallon, AQ = 7530 gallons

Materials price variance = AQ(AP-SP)

-3765 = 7530*(AP