Orchard Ceramics produces large planters to be used in urban landscaping project

Question

Orchard Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 33 pounds. The company uses a standard cost of $2.35 per pound of clay. Orchard produced 2,000 planters in May. In that month, 68,000 pounds of clay were purchased and used at the total cost of $153,000 Read the requirements Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used DM-Direct materials) x ( )DM price variance x ( Requirement 2. Calculate the direct material quantity variance Determine the formula for the quantity variance, then compute the quantity variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U).) x ( x ( ) = DM quantity variance

Explanation / Answer

Standard Quantity = 33 pound * 2000 planters =66000 pound actual quantity = 68000pound Standard Price = $2.35/POUND actual PRICE per pound = $153000/68000 pound =$2.25 Direct Materials Price Variance = AQ × (SP – AP) Direct Materials Price Variance = (68000) × ($2.35 – 2.25) Direct Materials Price Variance = $6800 F Direct Materials Quantity Variance = SP × (SQ – AQ) Direct Materials Quantity Variance = $2.35 × (66000-68000) Direct Materials Quantity Variance = $4700 F Total Direct Materials Spending Variance = $6800 F + $4700 A = $2100 F

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