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30 June, 00:30

Gipple Corporation makes a product that uses a material with the quantity standard of 7.8 grams per unit of output and the price standard of $6.50 per gram. In January the company produced 3,900 units using 25,370 grams of the direct material. During the month the company purchased 27,900 grams of the direct material at $6.70 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is: Multiple Choice a. $6,084 F b. $5,580 U c. $6,084 U d. $5,580 F

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  1. 30 June, 00:43
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    The correct answer is B.

    Explanation:

    Giving the following information:

    Standard quantity = 7.8 grams per unit of output

    Standard price = $6.50 per gram.

    During the month the company purchased 27,900 grams of the direct material at $6.70 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 = (6.5 - 6.7) * 27,900

    Direct material price variance = $5,580 unfavorable.

    It is unfavorable because the actual price was higher than estimated.
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