Question

Exercise 6-13 The following information is available for Coady's Chocolates: Actual production 3,000 boxes Budgeted production 3,200 boxes Direct Materials Standard 2 pounds of chocolate per box @ $8 per pound Actual 7,000 pounds purchased @ $7.8 per pound 6,500 pounds used @ $7.8 per pound (a) Calculate the direct materials price and quantity variances. (Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter o for the amounts.) Direct material price variance Direct material quantity variance $

Answer 1

(a) Direct material price variance = (Standard price - Actual price) * Actual quantity

Standard price = $8 per pound

Actual price = $7.8 per pound

Actual quantity = 6500 pounds

Now, putting these values in the above formula, we get,

Direct material price variance = ($8 - $7.8) * 6500

Direct material price variance = $0.2 * 6500 = $1300

Since the variance is positive, so it is a favorable variance.

(b) Direct material quantity variance = (Standard quantity for actual units - Actual quantity) * Standard price

Standard price = $8 per pound

Standard quantity = 2 pound per box

Actual units = 3000 boxes

Standard quantity for actual units = 2 pounds * 3000 boxes = 6000 pounds

Actual quantity = 6500 pounds

Now, putting these values in the above formula, we get,

Direct material quantity variance = (6000 - 6500) * $8

Direct material quantity variance = - 500 * $8 = - $400

Since the variance is negative, so it is an unfavorable variance.