Question

Perfect Pet Collar Company makes custom leather pet collars. The company expects each collar to require 1.60 feet of leather and predicts leather will cost $2.70 per foot. Suppose Perfect Pet made 50 collars during February. For these 50 collars, the company actually averaged 1.95 feet of leather per collar and paid $2.20 per foot.

Required:

 1. Calculate the standard direct materials cost per unit. (Round your answer to 2 decimal places.) Standard Direct Materials per Collar 

2. Without performing any calculations, determine whether the direct materials price variance will be favorable or unfavorable. Direct Material Price Variance

3. Without performing any calculations, determine whether the direct materials quantity variance will be favorable or unfavorable. Direct Material Quantity Variance 

6. Calculate the direct materials price and quantity variances. 

Answer 1

Answers

• Requirement 1
  Standard direct material = 1.60 feet x $ 2.70 per foot = $ 4.32 per collar
• Requirement 2

Direct Material Price Variance = Favourable, as Standard price $ 2.70 is MORE than actual price $ 2.20 per foot

• Requirement 3
  Direct material quantity variance = Unfavourable, as Actual qty used 1.95 feet is MORE than Standand qty allowed 1.60 feet
• Requirement 4, with working

DIrect Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity = 50 x 1.95
(	$                                2.70	-	$                       2.20	)	x	97.5
	48.75
	Variance		$                    48.75			Favourable-F

Direct Material Quantity Variance
(	Standard Quantity = 50 colar x 1.60 feet	-	Actual Quantity	)	x	Standard Rate
(	80	-	97.5	)	x	$                           2.70
	-47.25
	Variance		$                    47.25			Unfavourable-U