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1 August, 11:01

One widget requires 0.75 pounds of Material X, which has a standard price of $4 per pound. The company uses 2,450 pounds of Material X, which costs $10,000 to produce 3,300 widgets. Calculate the following variances and determine if each is favorable or unfavorable: a. Direct materials price variance b. Direct materials quantity variance c. Direct materials cost variance

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  1. 1 August, 15:01
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    a. $200 unfavorable

    b. $100 favorable

    c. 100 unfavorable

    Explanation:

    The computation is shown below:

    a. Direct material price variance

    = Actual Quantity * (Standard Price - Actual Price)

    = 2,450 * ($4 - $10,000 : 2,450)

    = 2,450 * ($4 - $4.082)

    = 2,450 * $0.082

    = $200 unfavorable

    b. Direct materials quantity variance

    = Standard Price * (Standard Quantity - Actual Quantity)

    = $4 * (0.75 pounds * 3,300 - 2,450)

    = $4 * (2,475 - 2,450)

    = $4 * 25

    = $100 favorable

    So, the direct material cost variance is

    = Direct material price variance + Direct materials quantity variance

    = $200 unfavorable + $100 favorable

    = $100 unfavorable
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