Question

Direct Materials Variances

The following data relate to the direct materials cost for the production of 2,400 automobile tires:

Actual:	57,900 lbs. at $1.7 per lb.
Standard:	56,700 lbs. at $1.75 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	$
Direct Materials Quantity Variance	$
Total Direct Materials Cost Variance	$

b. The direct materials price variance should normally be reported to the  . When lower amounts of direct materials are used because of production efficiencies, the variance would be reported to the  . When the favorable use of raw materials is caused by the purchase of higher-quality raw materials, the variance should be reported to the .

Answer 1

Computation of Direct material Price Variance and Direct material Quantity Variance

Direct material Price Variance = (Standard Price-Actual Price)*Actual Quantity purchased

Standard price per lb	A	$1.75
Actual Price per lb	B	$1.70
Actual lbs Purchased	C	57,900
Direct material Price Variance	(A-B)*C	$2,895	i.e. Favorable

Direct material Quantity Variance = (Standard Quantity -Actual quantity used)*Standard Price

Standard Material of lbs for actual production	A	56,700
Actual feet of Vinyl used	B	57,900
Standard Price per lbs	C	$1.75
Direct material Quantity Variance	(A-B)*C	-$2,100	i.e. Unfavorable

Total Direct Material Cost Variance = Direct material Price Variance + Direct material Quantity Variance

= $2,895 + (-$2,100) = $795 Favorable

Therefore, as per the requirement of the question

Direct material Price Variance = - $2,895

Direct material Quantity Variance = $2,100

Direct Material Cost Variance = - $795

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