Question

Direct Materials Variances The following data relate to the direct materials cost for the production of 2,400 automobile tires: Actual: 62,200 lbs. at $1.8 per lb. Standard: 61,000 lbs. at $1.75 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 If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the . 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

Answer 1

Answer a.

Direct materials price variance = Actual materials used * (Actual price per lb. - Standard price per lb.)
Direct materials price variance = 62,200 * ($1.80 - $1.75)
Direct materials price variance = $3,110 Unfavorable

Direct materials quantity variance = Standard price per lb. * (Actual materials used - Standard materials allowed)
Direct materials quantity variance = $1.75 * (62,200 - 61,000)
Direct materials quantity variance = $2,100 Unfavorable

Total direct materials cost variance = Actual materials used * Actual price per lb. - Standard materials allowed * Standard price per lb.
Total direct materials cost variance = 62,200 * $1.80 - 61,000 * $1.75
Total direct materials cost variance = $5,210 Unfavorable

Answer 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 favourable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the purchasing department.