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 .

• 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.

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