Question

Direct Materials Variances Bellingham Company produces a product that requires 8 standard pounds per unit. The standard price is $6.5 per pound. If 3,000 units required 24,500 pounds, which were purchased at $6.37 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) 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. a. Direct materials price variance $ Favorable b. Direct materials quantity variance $ Unfavorable c. Total direct materials cost variance $ Unfavorable

Answer 1

Computation of Direct materials price variance,quantity variance and material cost variance:

Standard Data for Actual output:

Standard quantity = 8 pound per unit*3000 = 24000 Pounds

Standard Price = $6.5 per pound

Actual Data Actual output:

Actual quantity = 24500 Pounds

Actual Price = $ 6.37 per pound

(a) Material Price Variance = (Standard Price - Actual Price)*Actual Quantity

= ($6.5 - $ 6.37)*24500 = -$3185 Favorable

(b) Material Quantity Variance = (Standard quantity - Actual quantity)*Standard Price

= (24000 -  24500)*$6.5 = $3250 Unfavorable

(c) Total Material Cost Variance = (Standard cost - Actual cost)

= (24000*$6.5 - 24500*6.37) = ($156000 - $156065) = $65 Unfavorable