Question

Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is $3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at $4.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

Direct material price variance is = (Actual Price - Standard Price)*Actual Quantity
Direct material price variance is = (4.00-3.75)*36000
Direct material price variance is = $ 9,000 Unfavorable
Direct Material Quantity Variance = (actual quantity - standard quantity) x standard price
Direct Material Quantity Variance = (36000-(15000*2.50))*3.75
Direct Material Quantity Variance = - $ 5,625 Favourable
Direct Materials Cost Variance is = Direct Material Price Variance + Direct Material Quantity Variance
Direct Materials Cost Variance is = 9000-5625
Direct Materials Cost Variance is = $ 3,375 Unfavourable