Question

Direct Materials Variances

The following data relate to the direct materials cost for the production of 1,900 automobile tires:

Actual:	49,200 lbs. at $1.95 per lb.
Standard:	50,200 lbs. at $2.00 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
Price variance	-2460	Favorable	=49200*(1.95-2)
Quantity variance	-2000	Favorable	=2*(49200-50200)
Total direct materials cost variance	-4460	Favorable	=(49200*1.95)-(50200*2)
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 reported to the Purchasing Department