Question

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

Actual:	55,700 lbs. at $1.9	$105,830
Standard:	56,800 lbs. at $1.95	$110,760

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.

Price variance	$
Quantity variance	$
Total direct materials cost variance	$

b. The direct materials price variance should normally be reported to the  . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the  . 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  .

Answer 1

a.

Direct Material

Amount in $

Standard(2200)

SQ

SP

SQ X SP

AQ

AP

AQ X AP

AQ X SP

56800

$       1.95

$   110,760

55700

$       1.90

$          105,830

$        108,615

Direct Material Price Varience :- AQ X SP- AQ X AP

$ (2,785)

Direct Material Quantity Varience :- SQ X SP- AQ X SP

$ (2,145)

Direct Material Cost Varience :- SQ X SP- AQ X AP

$ (4,930)

b.

The direct materials price variance should normally be reported to the Plant Manager of Purchasing Dept.

If lower amounts of direct materials had been used because of production efficiencies,

the variance would be reported to the Purchasing Department 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 Purchase Department Purchase Supervisor.