Question

ABC Company began operations on June 1, 2019. For its first month of
operations, ABC Company established the following standards for one
unit of its single product:

                    standard quantity         standard price
direct materials        8 pounds              $3.50 per pound
direct labor            7 hours               $15.00 per hour
variable overhead       7 hours               $7.50 per hour

The following information is available for the month of June:

1.  65,000 pounds of direct materials were purchased at a total
    cost of $188,500.
2.  45,000 direct labor hours were worked at a total cost of
    $731,250.
3.  The variable overhead cost for the month totaled $325,000.
4.  6,500 units were produced.
5.  At June 30, ABC Company had 8,000 pounds of direct materials
    on hand.

Calculate the direct material price variance for June.

If the variance is favorable, place a minus sign in front of your
answer (i.e., -5000). If the variance is unfavorable, simply enter
your answer as a number (i.e., 5000).

Answer 1

Direct material price variance = Actual cost of Materials purchased-(Quantity purchased*Standard price)

Direct material price variance = 188500-(65000*3.50)= -39000

Direct material price variance = -39000