Question

Direct Materials Variances

The following data relate to the direct materials cost for the production of 2,100 automobile tires:

Actual:	58,000 lbs. at $1.75 per lb.
Standard:	59,200 lbs. at $1.70 per lb.

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.

Direct Materials Price Variance	$
Direct Materials Quantity Variance	$
Total Direct Materials Cost Variance	$

b. The direct materials price variance should normally be reported to the  . When lower amounts of direct materials are used because of production efficiencies, the variance would be reported to the  . When the favorable use of raw materials is caused by the purchase of higher-quality raw materials, the variance should be reported to the  .

Answer 1

ANSWER:

(A)

Material price variance = actual quantity x (standard price - actual price)

= 58000 x ($1.70 - $1.75)

= $2900 unfavorable

(B)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $1.70 x (59200 - 58000)

= $2040 Favorable

(C)

Total direct material variance = (standard quantity x standard price) - (actual quantity x actual price)

=(59200 x $1.70) - (58000 x $1.75)

= $100640 - $101500

= $860 Unfavorable

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when lower amounts of direct materials are used because of production efficiency, the variance would be reported to the Production Supervisor

when the favorable use of raw materials is caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department