Direct Materials Variances
The following data relate to the direct materials cost for the production of 2,400 automobile tires:
Actual: | 61,700 lb. at $2.05 |
Standard: | 62,900 lb. at $2.00 |
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Price variance | $ | Unfavorable |
Quantity variance | $ | Favorable |
Total direct materials cost variance | $ | Unfavorable |
b. The direct materials price variance should normally be reported to the Purchasing Department . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production Supervisor . If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department .
Answer
Material Price Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
( |
$ 2.00 |
- |
$ 2.05 |
) |
x |
61700 |
-3085 |
||||||
Variance |
$ 3,085.00 |
Unfavourable-U |
Material Quantity Variance |
||||||
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
( |
62900 |
- |
61700 |
) |
x |
$ 2.00 |
2400 |
||||||
Variance |
$ 2,400.00 |
Favourable-F |
Total Direct Material Cost Variance =
3085 Unfavourable + 2400 favourable = $ 685 Unfavourable,
OR
Total Direct Material Cost Variance |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 125,800.00 |
- |
$ 126,485.00 |
) |
||
-685 |
||||||
Variance |
$ 685.00 |
Unfavourable-U |
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