Question

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

Direct materials standard (2 lbs @ $2/lb) $4 per finished unit

Total direct materials cost variance—unfavorable $17,750

Actual direct materials used 60,000 lbs.

Actual finished units produced 20,000 units

Answer 1

Unfavorable variance is shown as a positive number
Standard quantity for actual production = Actual production * Standard quantity per unit = 20000 * 2 =	40000
Total direct materials cost variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price )
17750 = ( Actual quantity * Actual price ) - ( 40000 * 2 )
17750 = ( Actual quantity * Actual price ) - 80000
( Actual quantity * Actual price ) = 17750 + 80000 =	97750
Direct materials price variance = ( Actual quantity * Actual price ) - ( Actual quanatity - Standard price )
Direct materials price variance = 97750 - ( 60000 * 2 ) =	-22250	Favorable