Question

Ceasar pants standard cost included 0.70 metres of direct material per pants at $3.80 per metre. Ceasar actually used 32,500 metres of direct material at a cost of $3.75 per metre to produce 50,000 pants.

a) Calculate the direct materials price variance: $ Answer

b) Is the direct materials price variance favourable or unfavourable?

c) Calculate the direct materials quantity variance: $ Answer

d) Is the direct materials quantity variance favourable or unfavourable?

e) Calculate the total direct materials variance: $ Answer

f) Is the total direct materials variance favourable or unfavourable?

Answer 1

Answer a .Direct materials price variance

= Actual quantity of DM used *( Actual price per units of DM - Standard price per units of DM )

= 32,500 metres * ( $3.75 - $3.80) = $1,625

Answer b. Direct materials price variance is favourable. Since actual price per units of DM is less than standard price per units of DM.

Answer c. Direct materials quantity variance:

= ( Standard quantity of DM allowed - Actual quantity of DM used ) * Standard price per units of DM

= [ (50,000 pants * 0.70 metres) -  32,500 metres ] * $3.80 = $9,500

Answer d. Direct materials quantity variance is favourable. Since standard quantity of DM allowed is more than actual quantity of DM used.

Answer e. Total direct materials variance

=  .Direct materials price variance +  Direct materials quantity variance

= $1,625 + $9,500 = $11,125

Answer f. Total direct materials variance is favourable. Since both direct materials price variance & direct materials quantity variance are favourable.