Question

Direct Materials Variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is $3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at $4.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

Materials Price Variance = (SP-AP) *AQ

= (3.75 - 4.00) * 36,000

= 9,000 Unfavorable

Materials Quantity Variance = (SQ-AQ) * SR

= (15,000 * 2.5) - 36,000) * 3.75

= 5625 Favourable

Materials cost variance = 9,000 U + 5625 F

Materials cost variance = 3375 U