Direct Materials Variances MyTime, Inc., produces electronic timepieces. The com

Question

Direct Materials Variances

MyTime, Inc., produces electronic timepieces. The company uses mini-LCD displays for its products. Each timepiece uses one display. The company produced 540 timepieces during October. However, due to LCD defects, the company actually used 570 LCD displays during October. Each display has a standard cost of $8.60. Five hundred seventy LCD displays were purchased for October production at a cost of $4,560.

Determine the price variance, quantity variance, and total direct materials cost variance for October. Use the minus sign to enter favorable variances as negative numbers.


Price Variance: $_____________ Favorable Variance

Quantity Variance: $______________ Unfavorable Variance

Total Direct Materials Cost: $____________ Favorable Variance


(I understand that to get price variance it is the difference between the actual and standard prices, multiplied by the actual quantity, quantity variance is the difference between the actual and standard quantities, multiplied by the standard price, and that Cost variance is the price variance plus the quantity variance... however since the actual price is not given it's throwing me off. Accounting is not my strong suit!)

Explanation / Answer

Materials price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price) Actual price=$4,560/570= $8.00 Materials price variance = 570*(8 -$8.60)= $342.00 Favorable Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard price) =(570-540)*$8.60 = $258.00 Unfavorable Total Direct Materials Cost = -$342.00 Favorable+ $258.00 Unfavorable =$84 Favorable

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