Question

Direct Materials Variances

The following data relate to the direct materials cost for the production of 2,000 automobile tires:

Actual:	57,500 lbs. at $2 per lb.
Standard:	55,800 lbs. at $1.95 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 . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the . 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 .

Answer 1

Std Quantity for actual production: 55800 units
Actual Quantity used: 57500 units
Std price per unit: 1.95
Actual price per unit: 2.00
Material Price variance: Actual Qty (Std price-Actual price)
		57500 (1.95-2.00) = $2875 Unfav
Material Quantity Variance: Std price (Std qty-Actual Qty)
		1.95 (55800-57500 ) = $ 3315 Unfav
Material cost variance: Sd qty*Std price -Actual Qty*Actual price
		55800*1.95 - 57500 *2 = $6190 Unfav
Direct Material price variance is normally reported to Purchase department.
Direct material lower amount used bacuase of production efficiencies, the variances should be reported to Production department.
If the favorable use of raw material has been casused by high quality of purchase of raw material, the variance should be reporteed to Purchase department.