Question

Direct Materials Variances Bellingham Company produces a product that requires nine standard pounds per unit. The standard price is $8.5 per pound. If 2,100 units used 18,100 pounds, which were purchased at $8.93 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance

Answer 1

Answer:

The correct answer is:

(a) -7783

(b) 6800

(c) -983

Explanation:

According to the given values in the question:

(a)

The price variance will be:

= $(8.5-8.93)\times 18100$

= $-0.43\times 18100$

= $-7783$ (Favorable)

(b)

The quantity variance will be:

= $(2100\times 9-18100)\times 8.5$

= $(18900-18100)\times 8.5$

= $800\times 8.5$

= $6800$ (Unfavorable)

(c)

The cost variance will be:

= $(2100\times 9\times 8.5)-(18100\times 8.93)$

= $(160650)-(161633)$

= $-983$ (Favorable)