Question

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 1

Answer

• Requirement ‘a’

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

• Requirement ‘b’. Complete and Correct.