Dior,Inc. Produces perfumes. The direct materials and direct labor standards for

Question

Dior,Inc. Produces perfumes. The direct materials and direct labor standards for one bottle of perfume are given below:

During the most recent month, the following activity was recorded:

Twenty thousand ounces of material were purchased at a cost of $2.5 per ounce.

All of the material was used to produce 2,500 bottles of perfume.

Required:

1. Compute the direct materials quantity variances for the month. Is this favorable or unfavorable?

2. Compute the direct materials per price variances for the month. Is this favorable or unfavorable?

3. Compute the material spending variance. Is this favorable or unfavorable?

Standard Quantity Standard Price Standard Cost Direct Materials 10 ounces per bottle $3 per ounce $30 bottle of perfume

Explanation / Answer

Quantity Price Spending Standard Actual Variance Analysis Standard Actual Variance Analysis Standard Actual Variance Analysis Direct Materials 10 8 -2 Favourable 3 2.5 -0.5 Favourable 30 20 -10 Favourable

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