Question

Ed Co. manufactures two types of O rings, large and small. Both rings use the same material but require different amounts. Standard materials for both are shown.

	Large	Small
Rubber	3 feet at $0.25 per foot	1.25 feet at $0.25 per foot
Connector	1 at $0.03	1 at $0.03

At the beginning of the month, Ed Co. bought 24,000 feet of rubber for $6,600. The company made 3,000 large O rings and 4,000 small O rings. The company used 14,500 feet of rubber.

A. What are the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance? Enter all amounts as positive numbers. If required round your answers to two decimal places.

Direct materials price variance	$	Unfavorable
Direct materials quantity variance	$	Unfavorable
Total direct materials cost variance	$	Unfavorable

B. If they bought 10,000 connectors costing $310, what would the direct materials price variance be for the connectors? Round your intermediate calculations to three decimal places.

Direct materials price variance

$:

C. If there was an unfavorable direct materials price variance of $125, how much did they pay per foot for the rubber? Round your answer to two decimal places.

Actual price

$

Answer 1

Answer :

(A) Direct material price variance   = (SP - AP )* AQ Purchased

= SP*AQ Purchased - AP * AQ Purchased

= $ .25 *24000 - $ 6600

= $ 600 Unfavorable

Direct material price variance can be also calculated at the time of consumption or uses,

Direct material Price variance = (SP -AP )* AQ Used

= ($ .25 - $ .275 )*14500

= $ 362.5 Unfavorable

Direct material Quantity variance = (SQ - AQ used )* SR

= ( 14000feet - 14500 feet ) $ .25

= $ 125 Unfavorable

Working note - 1

SQ for actual output = 3000*3 feet + 4000 *1.25 feet

= 14000 feet

Direct material cost variance = Standard cost - Actual cost

= 3* .25*3000 + 1.25*.25*4000 - (6600/24000)*14500

= 487.5 Unfavorable

(B)

Direct material price variance for connectors = (SP - AP )* AQ purchased

= SP* AQ Purchased - AP * AQ purchased

= $ 0.03 * 10000 - $ 310

= $ 10 unfavorable

(C)

Direct material price variance = - $ 125

SP*AQ purchased - AP * AQ Purchased = - $ 125

$ .25 * 24000 - AP * 24000 = - $ 125

AP = 0.26  per foot ( approx)