Gipple Corporation makes a product that uses a material with the quantity standard of 7.4 grams per unit of output and the price standard of $6.10 per gram. In January the company produced 3,500 units using 24,970 grams of the direct material. During the month the company purchased 27,500 grams of the direct material at $6.30 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

Material Price Variance is the difference between the standard price and the actual price for the actual quantity of materials used for production. It can be classified as either Favourable (positive) or Unfavourable (negative).

Calculating for it therefore gives the following formula,

Material Price Variance = (Standard price - Actual price) * Actual quantity

Plugging in the figures we have,

Material Price Variance = (6.10 - 6.30) * 27,500

Material Price Variance = -$5,500

This means that the Market Price Variance for January is $5,500 (Unfavourable)