Question

The following data relate to the direct materials cost for the production of 10,000 automobile tires: Actual: 145,000 lbs. at $2.80 per lb. Standard: 150,000 lbs. at $2.75 per lb. a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

Answer and Explanation :

The computation is shown below:

Direct materials price variance is

= (actual price - standard price) × actual quantity

= ($2.80 - $2.75) × 145,000

= $7,250 unfavorable

Because actual price is higher than standard price so this is unfavorable

Direct materials quantity variance is

= (actual quantity - standard quantity) × standard price

= (145,000 - 150,000) × $2.75

= -$13,750 favorable

Sum of direct material cost variance = $7,250 - $13,750

= -$6,500 favorable

We simply applied the above formulas