Price or rate variance relates to which of the following?

Price or rate variance relates to which of the following?

• A. The difference between the actual price paid and the standard price per unit
• B. The difference between the actual input quantity used and the standard quantity allowed
• C. The difference between the total actual cost and the budgeted total cost
• D. The difference between the actual and expected price paid for a unit

Answer: (A)

Price or rate variance shows the gap between what was actually paid per unit of input and what should have been paid per unit, using the actual quantity used. It reflects paying a different price than the standard rate, and is calculated as (actual price per unit − standard price per unit) × actual quantity used. If you pay more than the standard rate, the variance is adverse; paying less yields a favourable variance. This is distinct from usage variance, which relates to the quantity actually used versus the standard quantity, and from total or budget variances, which look at overall cost differences rather than the per-unit price. The option that describes the difference between actual price paid and the standard price per unit best captures this concept, while the others relate to quantity variances or broader cost differences.

Price or rate variance shows the gap between what was actually paid per unit of input and what should have been paid per unit, using the actual quantity used. It reflects paying a different price than the standard rate, and is calculated as (actual price per unit − standard price per unit) × actual quantity used. If you pay more than the standard rate, the variance is adverse; paying less yields a favourable variance. This is distinct from usage variance, which relates to the quantity actually used versus the standard quantity, and from total or budget variances, which look at overall cost differences rather than the per-unit price. The option that describes the difference between actual price paid and the standard price per unit best captures this concept, while the others relate to quantity variances or broader cost differences.