Tip Top Corp. produces a product that requires eight standard gallons per unit.
ID: 2466544 • Letter: T
Question
Tip Top Corp. produces a product that requires eight standard gallons per unit. The standard price is $9.50 per gallon. If 3,800 units required 31,300 gallons, which were purchased at $9.31 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.
a. Direct materials price variance $ b. Direct materials quantity variance $ c. Direct materials cost variance $Explanation / Answer
a. Direct materials price variance = [ Standard price - actual price ] * actual quantity
= [ 9.5 - 9.31 ] 31300 gallons
= 5947 favourable
b. Direct materials quantity variance = [ standard quantity - actual quantity ] * standard price
= [ 30400 - 31300 ] * 9.5
= 8550 unfavorable
c. Direct material cost variance =[ standard quantity * standard price] - [ actual quantity * actual price]
= [30400 * 9.5] - [ 31300 * 9.31]
= 288800 - 291403 = 2603 unfavourable.
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