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: Actual: 48,900 lbs. at $1.80 $88,020 Standard: 47,900 lbs. at $1.75 $83,825 a. 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 $ b. The direct materials price variance should normally be reported to the . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the . 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 .

Explanation / Answer

Actual Production 2000 Actuals: Quantity Rate Amount 48900 1.80 88020 Standard: Quantity Rate Amount 47900 1.75 83825 A DM Price Variance: (SR-AR)AQ (1.75-1.80)*48900 2445 Adverse DM Eff Variance: (SQ-AQ)SP (47900-48900)*1.75 1750 Adverse Total 4195 Adverse B Price Variance Reporting Purchase Department Efficiency Variance Reporting Production Department Good Quality Raw Reporting Purchase Department

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