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 .

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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.
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