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

Question

Direct Materials Variances Tip Top Corp. produces a product that requires eight standard gallons per unit. The standard price is $8 per gallon. If 6,200 units required 51,100 gallons, which were purchased at $7.84 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 Favorable b. Direct materials quantity variance c. Direct materials cost variance

Explanation / Answer

Material variance :

a) Direct material price variance = (8-7.84)*51100 = 8176 Favourable

b) Direct material quantity variance = (6200*8-51100)*8 = 12000 Unfavourable

c) Direct material cost variance = (6200*8*8-51100*7.84) = 3824 Unfavourable

Labour variance

A) Labour rate variance = (17-17.51)46400 = 23664 Unfavourable

b) Labour time variance = (4500*10-46400)17 = 23800 Unfavourable

c) Labour cost variance = (4500*10*17-46400*17.51) = 47464 Unfavourable

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