Puffy Parkas, Inc. manufactures designer parkas. The company uses standard costi

Question

Puffy Parkas, Inc. manufactures designer parkas. The company uses standard costing and has developed the following information about standards for its product.
Materials: 3.5 yards per unit; $13 per yard
Labor: 0.6 DL hour per unit; $11 per hour

During October, the company experienced an unanticipated spike in demand and increased production. Although planned production was for 2,000 units, the company actually produced 1,800 units. In anticipation of the original production volume, 7,000 yards were purchased, at a total cost of $80,000. During the month, 7,000 yards of material were used, and 1,150 direct labor hours were worked. Direct labor cost for the month totaled $13,225.

Compute the direct materials price variance and direct materials quantity variance and specify if each is favorable or unfavorable.

Explanation / Answer

Direct materials price variance = 7,000 *(13(standard) - 80,000/7,000 (actual)) = 11,000(favorable)

Direct materials quantity variance = 13 * (6,300(standard, 1,800 * 3.5 = 6,300) - 7,000(actual) = 9,100(unfavorable)

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