Question

Direct Materials Variances The following data relate to the direct materials cost for the production of 1,800 automobile tires: Actual: 59,500 lbs. at $1.7 per lb. Standard: 58,300 lbs. at $1.75 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

**Solution:**

a)

Direct
materials price variance = (actual price - standard price) x actual
quantity

=(1.7 -1.75)*59,500

=(2,975) Favorable

Direct
materials quantity variance = (Actual quantity - standard quantity)
x standard price

=(59,500 -58,300)*1.75

=2,100 Unfavorable

Total direct material cost variance =Direct materials price variance + Direct materials quantity variance

=(2,975) +2,100

=(875) favorable

b)

The direct materials price variance should normally be reported
to the **purchasing department**. If lower amounts of
direct materials had been used because of production efficiencies,
the variance would be reported to the **production
supervisor**. If the favorable use of raw materials had been
caused by the purchase of higher quality raw materials , the
variance should be reoprted to the **purchasing
department.**

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