Direct Materials Variances Bellingham Company produces a product that requires 2

Question

Direct Materials Variances

Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is $3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at $4.00 per pound, 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 $ Unfavorable b. Direct materials quantity variance $ Favorable c. Direct materials cost variance $ Unfavorable

Explanation / Answer

A) Direct material price variance = (standard price-actual price)actual quantity

= (3.75-4)36000

Direct material price variance = 9000 Unfavourable

B) Direct material quantity variance = (standard quantity-actual quantity)standard price

= (15000*2.5-36000)3.75

Direct material quantity variance = 5625 Favourable

DIrect material cost variance = Standard cost - actual cost

= (15000*2.5*3.75)-(36000*4)

Direct material cost variance = 3375 Unfavourable   

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