Question

The following data relate to the direct materials cost for the production of 2,200 automobile tires:

Actual:	58,600 lbs. at $1.8 per lb.
Standard:	56,800 lbs. at $1.85 per lb.

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

Direct Materials Price Variance	$	Favorable
Direct Materials Quantity Variance	$	Unfavorable
Total Direct Materials Cost Variance	$	Unfavorable

b. The direct materials price variance should normally be reported to the Purchasing Department . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to theProduction Supervisor . If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department .

Answer 1

Answer:

Material price variance                   = Actual Quantity x (Standard Price (-) Actual Price )                =     58,600 x ( $ 1.85 (-) $ 1.8)                =   58,600 x $ 0.04                =   $ 2,930 (Favourable)

Direct material price variance     =   $ 2,930 (Favourable)

Material Quantity variance                      =    Standard Price X (Standard Quantity (-) Actual Quantity )                      =     $ 1.85 x (56,800 (-) 58,600)                      =   $ 1.85 x   (1,800)                      =   $ 3,330 (UnFavourable)

Material Quantity variance =    $ 3,330 (UnFavourable)

Total Direct material cost variance      = (Standard Quantity x Standard price) - (Actual Quantity x Actual price)      = ( 56,800 x $ 1.85 ) (-) ( 58,600 x $ 1.8)      =   $ 105,080 (-) $ 105,480      =     $ 400 (UnFavourable)

Total Direct material cost variance =     $ 400 (UnFavourable)

The direct materials price variance should normally be reported to the purchasing department. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production supervisor. If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the purchasing department