Direct Materials Variances The following data relate to the direct materials cos

Question

Direct Materials Variances The following data relate to the direct materials cost for the production of 2,000 automobile tires: 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. Price variance Quantity variance Total direct materials cost variance The direct materials price variance should normally be reported to the Purchasing Department. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production Supervisor. 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 Purchasing Department.

Explanation / Answer

Material Quantity variance = (SQ AQ) × SP

                                                      = (62700 -61500) x1.85

                                                      = 2,220 favorable

Total direct material cost variance = price variance + quantity variance

                                                                    = 3075 (U) + 2220 (F)

                                                                    = 855 U

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