Gipple Corporation makes a product that uses a material with the quantity standard of 7.3 grams per unit of output and the price standard of $6.00 per gram. In January the company produced 3,400 units using 24,870 grams of the direct material. During the month the company purchased 27,400 grams of the direct material at $6.10 per gram. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for January is:
A) $2,482 Favorable
B) $2,740 Unfavorable
C) $2,482 Unfavorable
D) $2,740 Favorable

Question

Quizplus · Accepted Answer

To calculate the materials price variance, we need to compare the actual price paid for the direct material with the standard price.

Standard price per gram = $6.00 
Actual price per gram = $6.10

Quantity of direct material purchased = 27,400 grams

Materials price variance = (Actual price - Standard price) x Quantity 
= ($6.10 - $6.00) x 27,400 
= $2,740 Unfavorable

Therefore, the answer is B.

Gipple Corporation Makes a Product That Uses a Material with the Quantity