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Direct Materials Variances Bellingham Company produces a product that requires 8 standard pounds per unit. The...

Direct Materials Variances Bellingham Company produces a product that requires 8 standard pounds per unit. The standard price is $5.5 per pound. If 3,400 units required 26,700 pounds, which were purchased at $5.66 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.

Solutions

Expert Solution

(a)

Direct material price variance = (Actual price – Standard price) x Actual quantity

                                          = ($ 5.66 - $ 5.5) x 26,700 = $ 0.16 x 26,700 = $ 4,272 [Unfavorable]

(b)

Standard quantity of material for 3,400 units = 8 x 3,400 = 27,200 pounds

Direct material quantity variance = (Actual quantity - Standard quantity) x Standard price per unit

                                               = (26,700 – 27,200) x $ 5.5 = -500 x $ 5.5 = - $ 2,750   [Favorable]

(c)

Total direct material cost variance = Direct material price variance + Direct material quantity variance

                                                 = $ 4,272 - $ 2,750 = $ 1,522    [Unfavorable]

ekkarill92 answered 2 months ago
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