Question

1)

Direct Materials Variances

The following data relate to the direct materials cost for the production of 2,300 automobile tires:

Actual:	61,300 lbs. at $1.85 per lb.
Standard:	63,100 lbs. at $1.8 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	$	Unfavorable
Direct Materials Quantity Variance	$	Favorable
Total Direct Materials Cost Variance	$	Favorable

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 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

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2)

Factory Overhead Cost Variances

Blumen Textiles Corporation began April with a budget for 47,000 hours of production in the Weaving Department. The department has a full capacity of 63,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows:

Variable overhead	$169,200
Fixed overhead	119,700
Total	$288,900

The actual factory overhead was $292,400 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 49,000 hours. Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.

a. Variable factory overhead controllable variance: $  Favorable

b. Fixed factory overhead volume variance: $ Unfavorable

Answer 1

1a)

Direct Materials Price Variance             = Actual Quantity x ( Standard price (-) Actual price )              =    61,300 x ( $ 1.80 (-) $ 1.85 )              =    $ 3,065 ( Unfavourable )

Direct Materials Price Variance =    $ 3,065 ( Unfavourable )

Direct Materials Quantity Variance               = Standard Price x ( Standard Quantity (-) Actual Quantity)               =   $ 1.80 x ( 63,100 (-) 61,300 )               =    ($ 3,240)   Favourable

Direct Materials Quantity Variance =       ($ 3,240)   Favourable

Total Direct Materials Cost Variance                  = (Standard Quantity x Standard Price ) (-) (Actual Quantity x Actual price )                  = ( 63,100 x $ 1.80 ) (-) ( 61,300 x $ 1.85)                   =   $ 113,580 (-) $ 113,405                  =   ($ 175 ) Favourable

Total Direct Materials Cost Variance = ($ 175 ) Favourable

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 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

2)

Variable factory overhead controllable variance             = Actual variable factory overhead (-) Standard variable factory overhead             = ( $ 292,400 (-) $ 119,700 ) (-)   ( $ 169,200 / 47,000 x 49,000 )             =   $ 172,700 (-) $ 176,400             =    ( $ 3,700 ) Favourable

Variable factory overhead controllable variance =     ( $ 3,700 ) Favourable

Fixed factory overhead volume variance                     = Applied Fixed overhead (-) Budgeted fixed overhead                     =    ( $ 119,700 / 63,000 x 49,000 ) (-) $ 119,700                     =     $ 93,100 (-) $ 119,700                     =      $ 26,600 UnFavourable

Fixed factory overhead volume variance =    $ 26,600 UnFavourable