The Silent Door Company manufactures soundproof doors. Each door requires two pi

Question

The Silent Door Company manufactures soundproof doors. Each door requires two pieces of 16-gauge sheet steel measuring 94 inches by 50 inches. The standard cost of each piece of steel is $150. During the month of July, 2,040 doors were started and completed, and there were no beginning or ending work in process inventories. Accounting records revealed that 4,200 pieces of sheet steel were purchased during July at a cost of $623,700. All 4,200 pieces were used during the month.

Compute the direct materials price and direct materials quantity variances for July production, assuming the price variance is isolated at the time of purchase. Note whether the variances are favorable or unfavorable. Round to the nearest dollar.

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Direct Material Price Variance = Actual Quantity*(Actual Rate - Standard Rate) = 4200*(623700/4200 - 150) = 6300 (Favorable)

Direct Material Quantity Variance = Standard Rate*(Actual Quantity - Standard Quantity) = 150*(4200 - 2040*2) = 18000 (Unfavorable)

Thanks.

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