2. E9-3 Interpreting Direct Materials Price, Quantity Variances [LO 9-3] Perfect

Question

2.

E9-3 Interpreting Direct Materials Price, Quantity Variances [LO 9-3]

Perfect Pet Collar Company makes custom leather pet collars. The company expects each collar to require 1.75 feet of leather and predicts leather will cost $3.00 per foot. Suppose Perfect Pet made 70 collars during February. For these 70 collars, the company actually averaged 2.00 feet of leather per collar and paid $2.50 per foot.

Required:
1. Calculate the standard direct materials cost per unit. (Round your answer to 2 decimal places.)



2. Without performing any calculations, determine whether the direct materials price variance will be favorable or unfavorable.



3. Without performing any calculations, determine whether the direct materials quantity variance will be favorable or unfavorable.



6. Calculate the direct materials price and quantity variances. (Round your intermediate calculations and final answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Explanation / Answer

1) Calcuation of standard direct materials cost per unit

Standard direct materials cost per unt = 1.75*3

=5.25

2) Whether the direct material price variance will be favourable or unfavourable

Material price variance is favorable.

3) Whether the direct material quantity variance will be favourable or unavourable

Material quantity variance is unfavorable

6) Calculation of direct material price and quantity variances

Direct material price variance = (3.00-2.50)*140 = 70 F

Direct material quantity variance = (1.75*70-2.00*70)*3 = -52.5 U

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