Question

Tip Top Corp. produces a product that requires nine standard gallons per unit. The standard price is $6 per gallon. If 3,400 units required 31,800 gallons, which were purchased at $5.88 per gallon, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance

Answer 1

Results are below.

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= (6 - 5.88)*31,800

Direct material price variance= $3,816 favorable

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

Direct material quantity variance= (9*3,400 - 31,800)*6

Direct material quantity variance= $7,200 unfavorable

Total direct material cost variance= 3,816 - 7,200

Total direct material cost variance= $3,384 unfavorable