C is corrent. This alternative correctly calculates the direct material price variance as the difference between the standard ($2.50) and actual cost ($120,000 ÷ 50,000 = $2.40) of direct materials per pound ($2.50 – $2.40 = $0.10) times the actual pounds purchased (50,000).
A is incorrect. This alternative incorrectly calculates the direct material price variance as the difference between the budgeted direct materials and actual direct materials used (48,000 – 51,000) times the standard price for direct materials ($2.50). Thus, this variance calculation does not focus on the difference between the actual and standard price--the purpose of a price variance.
B is incorrect. This alternative correctly calculates the direct material price variance as the difference between the standard and actual cost of direct materials per pound ($2.50 – $2.40 = $0.10) but uses the actual pounds used (51,000) rather than the actual pounds purchased (50,000).
D is incorrect. This alternative incorrectly calculates the direct material price variance as the difference between the budgeted direct material purchases at standard cost (48,000 × $2.50 = $120,000) and the actual cost of the direct materials (also $120,000). The direct material price variance should be the difference between the standard and actual cost of direct materials per pound times the actual pounds purchased.
