Question

Direct Materials Variances Bellingham Company produces a product that requires 11 standard pounds per unit. The standard price is $6 per pound. If 2,000 units required 21,100 pounds, which were purchased at $6.18 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 Unfavorable X b. Direct materials quantity variance C. Total direct materials cost variance $ -3,798 $ 5,400 X $ -108,404 X Favorable X Favorable

Answer 1

Standard quantity (SQ) = units produced * 11

                              =          2000*11

                           = 22000

Actual quantity (AQ) = 21100

Standard price (SP) = $6

Actual price (AP)= $6.18

Material price variance = (SP-AP)*AQ

                                 = ( 6 – 6.18) *21100

                                = - 3798

                        = 3798 unfavorable variance

Note; you got wrong mark because they asked unfavorable in positive number

Material quantity Variance

                  =         SP(SQ-AQ)

                   = 6 (22000-21100)

                      = 5400 ( favorable )

                        = -5400

Direct material cost variance

               =       (SQ*SP) –( AQ*AP)

                = 22000*6 – 21100*6.18

                   = 132000 – 130398

                   = 1602 ( Favorable)

                     = -1602

Factory OH controllable variance

                 =     standard OH as per budget – Actual OH

Standard OH = 3300*7*2.5 = 57750

   Actual OH = 56310

Factory OH controllable variance = 57750-56310 = 1440 favorable = -1440

Note ; they asked in a opposite way for favorable negative sign