Question

Tip Top Corp. produces a product that requires 11 standard gallons per unit. The standard price is $4.5 per gallon. If 4,500 units required 50,500 gallons, which were purchased at $4.27 per gallon, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance

Answer 1

Step-by-step explanation:

To calculate the direct material price, quantity, and total variance; we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (4.5 - 4.27)*50,500

Direct material price variance= $11,615 favorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (11*4,500 - 50,500)*4.5

Direct material quantity variance= $4,500 unfavorable

Total direct material cost variance= 11,615 - 4,500

Total direct material cost variance= $7,115