Question

E9-3 Interpreting Direct Materials Price, Quantity Variances [LO 9-3]

Perfect Pet Collar Company makes custom leather pet collars. The company expects each collar to require 2.35 feet of leather and predicts leather will cost $4.20 per foot. Suppose Perfect Pet made 85 collars during February. For these 85 collars, the company actually averaged 2.50 feet of leather per collar and paid $3.80 per foot.

Required:
1. Calculate the standard direct materials cost per unit. (Round your answer to 2 decimal places.)



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



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



6. Calculate the direct materials price and quantity variances. (Round your intermediate calculations and final answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Answer 1

1.

Standard direct material cost per unit:

= $4.20 X 2.35

= $9.87

2.

Actual price per foot = $3.80

Standard price per foot = $4.20

Standard is more than actual, the variance will be Favourable.

3.

Actual material used per unit = 2.50 feet

Standard material to be used per unit = 2.35 feet

Standard is less than actual, the variance will be Unfavourable.

6.

Actual material used = 2.50 X 85 = 212.50

Standard material to be used = 2.35 X 85 = 199.75

Direct material price variance:

= ($4.20 - $3.80) X 212.50

= $85 Favourable

Direvt material quantity variance:

= (212.50 - 199.75) X $4.20

= $53.55 Unfavourable