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Soloman Corporation recently purchased 27,000 gallons of direct material at $5.40 per gallon. Usage by the end of the period amounted to 25,000 gallons. If the standard cost is $6.20 per gallon and the company believes �n computing variances at the earliest point possible, the direct-material price variance would be: $20,000F. $21,600F. $21,600U. $20,000U. $1 ,600F.

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Answer:

$21,600F

Explanation:

Assuming that the company computes variance at the earliest point possible, since Soloman Corporation purchased the material at a lower price than the standard cost, the direct-material price variance is favorable.

The value of this favorable variance is given by:

[tex]V=(\$6.20 - \$5.40)*27,000\\V=\$21,600\ F[/tex]

The direct-material price variance would be $21,600F.

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