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Question 15 ICI-LS04 The direct material (DM) price variance is $2,650 favorable and the DM usage variance is $3,000 unfavorable. The budgeted amount of DM for each unit of product is 2 lbs. to be purchased at the standard price of $10 per pound. 2,000 units were budgeted to be manufactured but the actual output was 2,500 units. (Assume material purchased equaled material used.) What was the actual price paid to purchase DM? $10.00 per pound $9.50 per pound $10.50 per pound $8.00 per pound You Answered Correctly! The standard amount of material to be used to produce 2,500 units is 5,000 lbs. (2,500 units x 2 lbs./unit). The actual amount of material used is found by solving for the unknown variable in the DM usage variance formula: DM usage variance = (actual quantity - standard quantity) * budgeted price $3,000 = (Y-5,000 lbs.)