I-Time, Inc., produces electronic timepieces. The company uses mini-LCD displays
ID: 2494276 • Letter: I
Question
I-Time, Inc., produces electronic timepieces. The company uses mini-LCD displays for its products. Each timepiece uses one display. The company produced 490 timepieces during October. However, due to LCD defects, the company actually used 510 LCD displays during October. Each display has a standard cost of $6.20. The company purchased 510 LCD displays for October production at a cost of $2,970. Determine the price variance, quantity variance, and total direct materials cost variance for October. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to nearest cent, if required. Price variance Quantity variance Total direct materials cost varianceExplanation / Answer
Price variance = Actual cost - standard cost of actual quantity
= 2970 - 510 * 6.2 = 192 Unfavorable
quantity variance = (Actual quantity - Standard quantity) * standard cost
= (510 - 490) 6.2 = 124 Favorable
Total direct materials cost variance = (SP x SQ) – (AP x AQ)
= (6.2 * 490) - (2970) = 68 Unfavorable