Question

Direct Materials Variances

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.
Price variance $ Unfavorable
Quantity variance $ Favorable
Total direct materials cost variance $ Favorable
b. The direct materials price variance should normally be reported to the Purchasing Department . If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production Supervisor . If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department .

Answer 1

Answer and Explanation:

The computation is shown below

a.

For Direct materials price variance is

= (Actual price - standard price) × actual quantity

= ($2.8 - $2.75) × 145000

= $7,250 unfavorable

For Direct materials quantity variance is

= (Actual quantity - standard quantity) × standard price

= (145,000 - 150,000) × $2.75

= $13,750 favorable

For Total direct material cost variance is

= $7,250 unfavarable + $13,750 favorable

= $6,500 favorable

b. The answers are purchasing department, production supervisor and the purchasing department