Direct Materials Variances Tip Top Corp. produces a product that requires 16 sta

Question

Direct Materials Variances

Tip Top Corp. produces a product that requires 16 standard gallons per unit. The standard price is $11.5 per gallon. If 5,700 units required 93,900 gallons, which were purchased at $11.04 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

direct material price variance = (Actual cost incurred - standard cost) x Actual quantity of units purchased

= $ (11.04-11.5)*93,900

= $ -0.46*93,900

= $ -43,194

material quantity variance = (Actual quantity used - Standard quantity used) x Standard cost per unit

= (93,900-91,200)*$ 11.5

= 2,700*$ 11.5

= $ 31,050

material cost variance = (SQ x SP) - (AQ x AP)

   = (91200*11.5)-(93,900*11.04)

   = $ 12,144

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