Question

Calculate Direct Material Variance and Efficiency Variance & Total Variance and if it is Favorable or Unfavorable. AP x AQ=$53,625 SP x AQ= $66,000 SP x SQ=$100,000

Answer 1

• Let SP be $ 200
• Then SP x AQ = $ 66,000

AQ = 66000 / 200

AQ = 330 units

• SP x SQ = 100000

SQ = 100000 / 200

SQ = 500 units

• AP x AQ = 53625

AP = 53625 / 330

AP = $ 162.5

• Calculation of Variances

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
330	x	$                 162.50		330	x	$        200.00		500	x	$          200.00
	$            53,625.00				$         66,000.00				$      100,000.00
Price Variance – Material [66000 – 53625]			$     12,375.00	Quantity Variance – Material [100000 – 66000]			$            34,000.00

Direct material Price Variance	$     12,375.00	Favourable
Direct material Quantity Variance	$ 34,000.00	Favourable
Total Direct material Variance	$     46,375.00	Favourable