Question

E9-3 Interpreting Direct Materials Price, Quantity Variances [LO 9-3]

Perfect Pet Collar Company makes custom leather pet collars. The company expects each collar to require 1.85 feet of leather and predicts leather will cost $3.20 per foot. Suppose Perfect Pet made 80 collars during February. For these 80 collars, the company actually averaged 2.00 feet of leather per collar and paid $2.70 per foot.

Required:
1. Calculate the standard direct materials cost per unit. (Round your answer to 2 decimal places.)



2. Without performing any calculations, determine whether the direct materials price variance will be favorable or unfavorable.



3. Without performing any calculations, determine whether the direct materials quantity variance will be favorable or unfavorable.



6. Calculate the direct materials price and quantity variances. (Round your intermediate calculations and final answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Answer 1

1) Calculation of Standard direct material cost (1.85*3.20) = 5.92

2) as per the question actual price is less than standard price direct material price variance will be favourable

3) Direct material quantity variance will be unfavourable as actual quntity (quantity used) is more than standard quantity

6) Direct material price variance = (std price-actual price)*actual quantity

direct price variance = (3.20-2.70)*(2*80) = 80 (F)

direct material quantity variance = (Standard quantity-actual quantity)*std price

Direct material quantity variance = (80*1.85-2*80)*3.20 = 38.4 (U)