Rip Tide Company manufactures surfboards. Calculate and interpret the direct mat

Question

Rip Tide Company manufactures surfboards. Calculate and interpret the direct materials price and quantity variances

Rip Tide Company manufactures surfboards. Its standard cost information follows Standard Standard PriceStandard (Rate) Direct materials (fiberglass) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($24,000 ÷ 300 units) Quantity 15 sq.ft 10 hrs 10 hrs Unit Cost 75.00 150.00 60.00 $ 5 per sqft. $ 15 per hr. $ 6 per hr 80.00 Rip Tide has the following actual results for the month of June Number of units produced and sold Number of square feet of fiberglass used Cost of fiberglass used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 314 4,940 $27,170 3,080 $48,356 $ 14,990 $ 20,700 Required 1. Calculate the direct materials price, quantity, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable U" for unfavorable.) Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

Explanation / Answer

1. Direct material price, quantity and spending variances:

Direct material price variance = ( Standard price per unit - Actual price per unit ) x Actual quantity of materials purchased = ( $ 5 - $ 5.50) x 4,940 = $ 2,470 U

Direct material quantity variance = ( Standard quantity for actual output - Actual quantity used) x Standard price per unit = ( 314 x15 - 4,940) x $ 5 = $ 1,150 U

Direct material spending variance = ( 314 x $75 - $ 27,170) = $ 3,620 U

2. Direct labor rate, efficiency and spending variances:

Direct material price variance $ 2,470 U Direct material quantity variance $ 1,150 U Direct material spending variance $ 3,620 U

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