Question

Direct Materials Variances Bellingham Company produces a product that requires 15 standard pounds per unit. The standard price is $6 per pound. If 4,400 units used 64,700 pounds, which were purchased at $6.12 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct materials price variance $ Unfavorable

b. Direct materials quantity variance $ Favorable

c. Direct materials cost variance $ Favorable

Answer 1

• All working forms part of the answer
• [a] Direct material price variance = $ 7764 U

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                               6.00	-	$                       6.12	)	x	64700
	-7764
	Variance		$              7,764.00			Unfavourable-U

• [b] DM quantity variance = $ (7,800) F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	66000	-	64700	)	x	$                           6.00
	7800
	Variance		$              7,800.00			Favourable-F

• [c] DM Cost Variance = $ (36) F

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                  396,000.00	-	$          395,964.00	)
	36
	Variance		$                    36.00			Favourable-F