Question

Calculate direct material variances when the quantity purchased equals the quantity used

Streetsboro Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $1.96 per pound of clay. Streetsboro produced 3,500 planters in May. In that month, 87,500 pounds of clay were purchased and used at the total cost of $168,000.
Requirements
1. Calculate the direct material price variance.
2. Calculate the direct material quantity variance.

Answer 1

Results are below.

Step-by-step explanation:

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

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

Direct material price variance= (1.96 - 1.92)*87,500

Direct material price variance= $3,500 favorable

Actual cost= 168,000 / 87,500 = $1.92

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

Direct material quantity variance= (3,500*24 - 87,500)*1.96

Direct material quantity variance= $6,860 unfavorable