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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