Question

In reviewing activity for July, the controller of Mathis, Inc., collected the following data concerning direct materials: Actual production $ 103,500 units Direct materials purchased (actual) $ 1,643,800 Standard cost of materials purchased $ 1,556,500 Standard direct materials costs per unit produced 14.1 Standard price times actual amount of materials used $ 1,408,450 Required: Compute the direct materials cost variances. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

$36,400 U

Step-by-step explanation:

Actual costs = $ 1,643,800

Actual inputs at standard price = $ 1,556,500

Price variance = ($ 1,556,500 – $1,643,800)

= $87,300 Unfavorable

Actual inputs at standard price = $ 1,408,450

Flexible budget (Standard Allowed for Good Output):

= $14.1 × 103,500

= $1,459,350

Efficiency variance = ($1,459,350 - $1,408,450)

= $50,900 Favorable

Direct materials cost variances:

= Price variance - Efficiency variance

=$87,300 U – $50,900 F

= $36,400 U