Question

Steinberg Company had the following direct materials costs for the manufacturing of product T in March: Actual purchase price per pound of direct materials $ 8.20 Standard direct materials allowed for units of product T produced 3,100 pounds Decrease indirect materials inventory 200 pounds Direct materials used in production 3,300 pounds Standard price per pound of material $ 7.55 Required:

1. What was Steinberg’s direct materials purchase-price variance and its direct materials usage variance for March? Indicate whether each variance was favorable (F) or unfavorable (U).

Direct materials purchase-price variance	xx	xx
Direct materials usage variance	xx

2. Prepare the appropriate journal entries for March

Answer 1

1. Direct Materials price variance = (Standard price - actual price) x Material purchased
= {$7.55 - $8.20} x 3100 = $2,015 Unfavorable

Direct Materials usage variance = (Standard quantity - actual quantity used) x standard price
= {3100 - 3300} x $7.55 = $1,510 Unfavorable

2.

Account Titles	Debit	Credit
Direct Material Inventory (3100*7.55)	$23,405
Direct materials price variance	$2,015
Accounts payable (3100*8.20)		$25,420
Inventory Finished Goods (3100*7.55)	$23,405
Direct materials Usage variance	$1510
Direct Material Inventory (3300*7.55)		$24,915