Question

A manufactured product has the following information for June. Standard Actual Direct materials (6 lbs. @ $9 per lb.) 48,600 lbs. @ $9.10 per lb. Direct labor (3 hrs. @ $15 per hr.) 23,700 hrs. @ $15.50 per hr. Overhead (3 hrs. @ $13 per hr.) $ 318,400 Units manufactured 8,000 Exercise 23-9 Direct materials variances LO P2 AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the direct materials price variance and the direct materials quantity variance. Indicate whether each variance is favorable or unfavorable.

Answer 1

Direct materials price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price)

= (48,600 * $9.1) - (48,600 * $9)

= $442,260 - $437,400

= 4,860 Unfavorable

Direct materials quantity variance = (Actual quantity * Standard price) - (Standard quantity * Standard price)

= (48,600 * $9) - [(8,000 * 6) * $9]

= $437,400 - $432,000

= $5,400 Unfavorable