Question

Direct Materials Variances

Tip Top Corp. produces a product that requires 15 standard gallons per unit. The standard price is $6 per gallon. If 3,300 units required 51,000 gallons, which were purchased at $5.88 per gallon, 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.

Please indicate whether these are favorable or unfavorable.

a. Direct materials price variance	$
b. Direct materials quantity variance	$
c. Direct materials cost variance	$

Answer 1

Direct materials price variance = Actual quantity * (Standard price - Actual price)

= 51,000 * ($6 - $5.88)

= $6,120 Favourable

Direct materials usage variance = Standard price * (Standard quantity - Actual quantity)

= $6 * [(3,300*15) - 51,000]

= $9,000 Unfavourable

Direct materials cost variance = Direct materials price variance + Direct materials quantity variance

= $6,120 Favourable + $9,000 Unfavourable

= $2,880 Unfavourable

a. Direct materials price variance	- $6,120 Favourable
b. Direct materials quantity variance	$9,000 Unfavourable
c. Direct materials cost variance	$2,880 Unfavourable