Question

QS 21-7 (Algo) Direct materials variances LO P3 A company reports the following for one of its products. Direct materials standard (4 pounds e $7 per pound) Actual units produced Actual cost of direct materials used

$28 per unit
110,000 units
$3,115,000
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Compute the total direct materials variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.)

Answer 1

The total direct materials variance is $0, indicating no variance.

Step-by-step explanation:

To compute the total direct materials variance, we need to calculate the difference between the standard cost of direct materials and the actual cost of direct materials used. The standard cost is calculated by multiplying the standard quantity of direct materials by the standard price per pound. In this case, the standard cost is 4 pounds * $7 per pound which is $28 per unit. The actual cost of direct materials used is given as $3,115,000 for 110,000 units. To find the total direct materials variance, we subtract the actual cost of direct materials used from the standard cost: $28 per unit * 110,000 units - $3,115,000 = $0.

Since the total direct materials variance is $0, it indicates that there is no variance. There is neither a favorable nor an unfavorable variance.

Answer 2

To calculate the total direct materials variance, find the difference between the actual cost incurred ($3,115,000) and the standard cost for actual production ($3,080,000). The result is an unfavorable variance of $35,000 because the actual cost is higher than the standard cost.

Step-by-step explanation:

To compute the total direct materials variance, we first need to establish the standard cost for the actual production and then compare it to the actual cost incurred. The standard cost is calculated based on the standard quantity and standard price for the materials.

• Standard cost per unit: 4 pounds × $7 per pound = $28 per unit
• Standard cost for actual production: 110,000 units × $28 per unit = $3,080,000
• Actual cost incurred: $3,115,000

The total direct materials variance is found by subtracting the standard cost for actual production from the actual cost incurred.

Total direct materials variance = Actual cost - Standard cost for actual production = $3,115,000 - $3,080,000 = $35,000

Since the actual cost exceeds the standard cost, the variance is unfavorable.