Question

Direct Materials Variances

The following data relate to the direct materials cost for the production of 1,800 automobile tires:

Actual:	52,000 lbs. at $1.75 per lb.
Standard:	53,000 lbs. at $1.80 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

a.

Direct material price variance = (Actual price - Standard price) * Actual quantity

Direct material price variance = ($1.75 - $1.80) * 52,000

Direct material price variance = $2,600 Favorable

Direct material quantity variance = (Standard quantity - Actual quantity) * Standard price

Direct material quantity variance = (53,000 - 52,000) * $1.80

Direct material quantity variance = $1,800 Favorable

Total direct material cost variance = $4,400 Favorable

b.

Purchasing department

Production supervisor

Purchasing department