Question

One widget requires 0.75 pounds of Material X, which has a standard price of $4 per pound. The company uses 2,450 pounds of Material X, which costs $10,000 to produce 3,300 widgets. Calculate the following variances and determine if each is favorable or unfavorable: a. Direct materials price variance b. Direct materials quantity variance c. Direct materials cost variance

Answer 1

Answer:

a. $200 unfavorable        

b. $100 favorable

c. 100 unfavorable

Explanation:

The computation is shown below:

a. Direct material price variance

= Actual Quantity × (Standard Price - Actual Price)

= 2,450 × ($4 - $10,000 ÷ 2,450)

= 2,450 × ($4 - $4.082)

= 2,450 × $0.082

= $200 unfavorable        

b. Direct materials quantity variance

= Standard Price × (Standard Quantity - Actual Quantity)

= $4× (0.75 pounds × 3,300 - 2,450)

= $4 × (2,475 - 2,450)

= $4 × 25

= $100 favorable

So, the direct material cost variance is

= Direct material price variance + Direct materials quantity variance

= $200 unfavorable  +  $100 favorable

= $100 unfavorable