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Gipple Corporation makes a product that uses a material with the quantity standard of 8.2 grams per unit of output and the price standard of $6.90 per gram. In January the company produced 4,300 units using 25,770 grams of the direct material. During the month the company purchased 28,300 grams of the direct material at $7.00 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

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Answer:

Material price variance     2830 unfavorable

Explanation:

Material price variance

A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favourable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite

Standard material cost of 2                                            $

28,300 grams should have cost (28,300×$6.90) = 195270

but did cost (actual cost - 28,300×$7.00)=               198100

Material price variance                                                 2830  unfavorable

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