Question

Direct material variances. VW manufacturing produces WiFi Jammers. For each Jammer, VW plans on using 3.8 pounds of material at an expected price of $1.50 per pound. VW produces 5,000 jammers during July. During July, the company purchased 27,500 pounds of plastic at a price of $48,125. Only 20,000 pounds were actually used during July. Required: Compute the direct material quantity and price variance for July.

Answer 1

WORKING NOTES: 1 : CALCULATION OF STANDARD COST AND ACTUAL OF MATERIAL				Actual output =		5000
	Standard Cost Per unit		Standard Cost for Actual Output		Actual Cost
	Standard Qunatity	SP	Standard Cost		Standard Qunatity	SP	Standard Cost		Actual Quantity	AP	Actual Cost
	3.80	$               1.50	$                        5.70		19000	$       1.50	$               28,500.0		20000	$         1.75	$                   35,000
	Micron				(5,000 X 3.80 Micron)					($48,125/27,500)
SOLUTION : 1
	Direct Material price Variance = (	Standard Price	-	Actual Price	) "X"	Actual Quantity
	Direct Material price Variance = (	$                        1.50	-	$                        1.75	) "X"	20000
	Direct Material price Variance =	$                        0.25	"X"	20000
	Direct Material price Variance =	$                     5,000	Unfavorable
SOLUTION : 2
	Material Quantity Variance = (	Actual Quantity	-	Standard Quantity	) "X"	Standard Cost per unit
	Material Quantity Variance = (	20,000	-	19,000	) "X"	$                        1.50
	Material Quantity Variance =	1,000	"X"	$                        1.50
	Material Quantity Variance =	$                     1,500	Unfavourable