Answer :
The Materials price variance is $172,500. the Materials price variance is unfavorable, and it can be calculated by multiplying the difference between the standard price and actual price by the actual quantity used.
Materials price variance is the difference between the actual cost incurred on the purchase of materials and the standard cost of the materials. It is the difference between the actual cost and the standard cost of the materials used, calculated by subtracting the actual cost from the standard cost.
In this case, the Actual Price is $7.00, Standard Price is $8.50, Actual Quantity used is 115,000 pounds, and Standard Quantity allowed is 118,000 pounds.
Therefore, the Materials price variance can be calculated as follows;
Materials price variance = (Standard price - Actual price) × Actual Quantity used
= ($8.50 - $7.00) × 115,000 pounds
= $1.50 × 115,000 pounds
= $172,500
Materials price variance can be defined as the difference between the actual cost of materials and the standard cost of materials. It is calculated by subtracting the actual cost of materials used from the standard cost of the materials allowed and is expressed in terms of money.
It is important to note that a favorable variance occurs when the actual cost is less than the standard cost, while an unfavorable variance occurs when the actual cost is greater than the standard cost.In this scenario, the actual price of materials was $7.00, while the standard price was $8.50. The actual quantity used was 115,000 pounds, while the standard quantity allowed was 118,000 pounds.
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