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irect Materials Variances a. Determine the direct materials price variance, dire

ID: 2449714 • Letter: I

Question

irect Materials Variances

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. The direct materials price variance should normally be reported to the

. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the . If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the .

Price variance $

Explanation / Answer

a)    Price Variance = (Actual cost - standard cost) * Actual quantity

= ( $2.60 - $2.50) * 2400

= $240

Quantity Variance = (Actual quantity - standard quantity) * standard cost

= (2400 - 2473) * $2.50

= $183

  Note : standard quantity = 2400units / 53500 lbs * 55120 lbs = 2473units

Total direct material cost variance =( standard quantity* standard price) - ( actual quantity * actual price)

=( 2473 * $2.50) - (2400 * $2.60)

= 6183 - 6240

= $57