Question

1. Direct Materials Variances

   De Soto Inc. produces tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 770 tablets during July. However, due to LCD defects, the company actually used 800 LCD displays during July. Each display has a standard cost of $12.50. Eight hundred LCD displays were purchased for July production at a cost of $9,400.

   Determine the price variance, quantity variance, and total direct materials cost variance for July.

   Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

   Price variance	$	Favorable
   Quantity variance	$	Unfavorable
   Total direct materials cost variance	$	Favorable

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   Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).

   The direct material cost variance is the difference between the actual and standard material cost.

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Answer 1

Direct material Price variance = (Standard Price – Actual Price)*Actual quantity purchased

= (12.50-Actual cost)*800

= 12.50*800 – 9,400

= $600 favorable

Direct material Quantity Variance = (Standard Quantity – Actual Quantity)*Standard Price

= (770-800)*12.50

= $375 Unfavorable

Direct material cost variance = 600 – 375

= $225 favorable