Use the following information to determine the variances listed below: Direct Ma
ID: 2530527 • Letter: U
Question
Use the following information to determine the variances listed below:
Direct Materials Direct Labor
Actual price of DM $127 Actual rate of DL $12.85
Standard price of DM $120 Standard rate of DL $13.00
Actual quantity of DM 1,125 units Actual quantity of DL 19,000 hours
Standard quantity of DM 1,100 units Standard quantity of DL 17,000 hours
Compute the price, quantity, and total material variances and determine if each variance is favorable or unfavorable.
1) Direct Materials Price Variance
2) Direct Materials Efficiency (quantity) Variance
3) Direct Materials Total Variance
Explanation / Answer
1)
Direct material price variance
= Actual Quantity x Actual Price - Actual Quantity x Standard Price
= 1,125 x $127 – 1,125 x $120
= $ 142,875 - $ 135,000
= $ 7,875 Adverse
The variance is adverse as the actual price is more than the standard price
2)
Direct material quantity variance
= Actual Quantity x Standard Price - Standard Quantity x Standard Price
= 1,125 x $120 – 1,100 x $120
= $ 135,000 - $ 132,000
= $ 3,000 Adverse
The variance is adverse as the actual quantity used is more than the standard quantity
3)
Direct material total variance
= Actual quantity x Actual price – Standard quantity x Standard price
= 1,125 x $127 – 1,100 x $120
= $ 10,875
This can also be calculated by adding Direct material price variance and direct material quantity variance
= $7,875 + $3,000
= $10,875