Question

Direct Materials Variances Silicone Engine Inc. produces wrist-worn tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 450 tablets during December. However, due to LCD defects, the company actually used 600 LCD displays during December. Each display has a standard cost of $6.40. LCD displays were purchased for December production at a cost of $3,540. Determine the price variance, quantity variance, and total direct materials cost variance for December. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. And, enter your final variance amount to the nearest whole dollar. Price variance Quantity variance Total direct materials cost variance

Answer 1

Answer)

Data for Material Variance

Particulars	Standard			Actual
	Number of Tablets	Cost per tablet	Total Cost	Number of Tablets	Cost per tablet	Total Cost
Direct Material (LCD Display)	450	$ 6.40	$ 2,880	600	$ 5.90	$ 3,540
Total	450		$ 2,880	600		$ 3,540

Note: It is given in the question that 600 LCD displays are used and Total actual cost of LCD Display units is $ 3,540. Therefore the actual unit cost is $ 5.90 (i.e. $ 3,540/ 600 units).

The Actual formulas for Material variances are:

• Material Cost variance = Standard cost of Material – Actual Cost of Material
• Material Price Variance = (Standard Price per unit – Actual Price per unit) X Total Actual units used.
• Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price per unit

However, since the question specifically requires that minus sign should be used for favourable variance and positive number will be used for Unfavourable variance, the formulas will be altered as follows:

• Material Cost variance = Actual cost of Material – Standard Cost of Material
• Material Price Variance = (Actual Price per unit – Standard Price per unit) X Total Actual units used.
• Material Quantity Variance = (Actual Quantity - Standard Quantity) X Standard Price per unit

Calculation of Material Cost Variance:

Material Cost variance = Total Actual cost of tablet – Total Standard Cost of tablet

                                       = (Actual number of tablets consumed X Actual price per tablet) - (Standard number of Tablet X Standard price per tablet)

                                        = (600 tablets X $ 5.90 per tablet) – (450 tablets X $ 6.40 per tablet)

                                       = $ 3,540 - $ 2,880

                                       = $ 660

Therefore the value of material cost variance is $ 660 (unfavourable).   

Calculation of Material Price Variance:

Material Price Variance = (Actual Price per tablet – Standard Price per tablet) X Total Actual tablets consumed

                                               = ($ 5.90 - $ 6.40) X 600 tablets

                                               = - $ 300

Therefore the value of material price variance is $ 300 (Favourable).   

Calculation of Material Quantity Variance:

Material Quantity Variance = (Actual Quantity of tablets - Standard Quantity of tablets) X Standard Price per tablet

                                                     = (600 tablets – 450 tablets) X $ 6.40 per tablet

                                                    = $ 960

Therefore the value of material quantity variance is $ 960 (Unfavourable).