Question

Direct Materials Variances Bellingham Company produces a product that requires 15 standard pounds per unit. The standard price is $8 per pound. If 5,600 units required 87,400 pounds, which were purchased at $8.24 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) 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. a. Direct materials price variance b. Direct materials quantity variance $1 c. Total direct materials cost variance

Answer 1

DIRECT MATERIAL VARIANCES

(A)

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

= 87400 x ($8 - $8.24)

= $20976 Unfavorable

(B)

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

= $8 x (84000 - 87400)

= $27200 Unfavorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 5600 x 15 = 84000 pounds

(C)

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

= (84000 x $8) - (87400 x $8.24)

= $672000 - $720176

= $48176 Unfavorable

DIRECT LABOR VARIANCES

(A)

Labor rate variance = actual hours x (standard rate - actual rate)

= 33700 x ($8 - $7.68)

= -$10784 Favorable

(B)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $8 x (32400 - 33700)

= $10400 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 5400 x 6 = 32400 hours

(C)

Total direct labor variance = (standard hours x standard rate) - (actual hours x actual rate)

= (32400 x $8) - (33700 x $7.68)

= $259200 - $258816

= -$384 Favorable