Question

The Counting Crows Company uses standard costing. During 2018, 12,000 pounds of direct material were purchased at an average cost of $5.20 per pound. Also during 2018, 10,500 pounds of direct material were used to produce 5,000 units. For 2018, the standards for direct materials were 2 pounds per unit at $5.50 per pound. Compute the direct materials quantity variance for 2018.

Answer 1

Answer :

Direct materials quantity variance = $2,750 Unfavorable

Explanation :

Formula for calculating Direct materials quantity variance are :

DM Quantity Variance = (AQ - SQ) × SP

where,

AQ = Actual quantity of direct materials used

SQ = Standard quantity allowed

SP = Standard price per unit of direct material

DM Quantity Variance = (AQ - SQ) × SP

DM Quantity Variance = (10,500 pounds - 10,000 pounds) × $5.50 per pound

DM Quantity Variance = 500 pounds × $5.50 per pound

DM Quantity Variance = $2,750 Unfavorable

Calculation of SQ :

SQ = Standard quantity of direct material per unit × Actual units produced

SQ = 2 pounds per unit × 5,000 units

SQ = 10,000 pounds