Gipple Corporation makes a product that uses a material with the quantity standard of 8.3 grams per unit of output and the price standard of $7.00 per gram. In January the company produced 4,400 units using 25,870 grams of the direct material. During the month the company purchased 28,400 grams of the direct material at $7.20 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

Direct material price variance= $5,680 unfavorable

Explanation:

Giving the following information:

The price standard of $7.00 per gram.

During the month the company purchased 28,400 grams of the direct material at $7.20 per gram.

To calculate the material price variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (7 - 7.2)*28,400= $5,680 unfavorable

It is unfavorable because the company purchase at a higher price than estimated.

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