Question

The following data related to product no 89 of des corporation

Direct material standard 3 sq feet at $2.50 per sq/foot

Direct material purchased 30, 000 square feet at $2.60 pe square foot

Direct material consumed 29,200 square feet

Manufacturing activity 9,600 units completed

Compute all standards and variances

Answer 1

Standard direct material quantity for 9600 units = 9600*3 sq feet = 28800 sq feet

Standard rate per direct material = $ 2.50 per sq/foot

Standard direct material cost = 28800*2.5 = $ 72000

Actual Direct material quantity used for 9600 units = 29200 sq feet

Actual rate per direct material = $ 2.60 per square foot

Actual direct material cost = 29200 *2.60 = $ 75920

DIrect Material cost variance = Actula Cost - Standard cost = 75920 -72000 = $ 3920 U

This Direct Material Cost variance of $ 3920 can be breaked into two variances as follows:

i) Direct Material Price Variance = (Std Rate - Actual rate) * Actual Units = (2.5 -2.6) *29200 = $ 2920 U

ii) Direct Material Quantity Variance = (Standard Units - Actual Units) * Std Rate = (28800 -29200) * 2.50 = $ 1000 U