Direct Materials Variances The following data relate to the direct materials cost for the production of 2,000 automobile tires: 55,800 lb. at $1.70 54,100 lb. at $1.75 Actual: Standard: a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Price variance Quantity variance Total direct materials cost variance Favorable Unfavorable Unfavorable ✔ ✔ ✔ ✔. If lower amounts of direct materials had been used ✓. If the favorable use of raw materials had been caused by b. The direct materials price variance should normally be reported to the Purchasing Department because of production efficiencies, the variance would be reported to the Production Supervisor the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
1. Direct Materials Price Variance: Measures the difference between the actual cost per unit of material used and the expected cost per unit, showing whether materials were purchased at a favorable or unfavorable price.
2. Direct Materials Quantity Variance: Reflects the variation between the actual quantity of materials used and the standard quantity expected, indicating whether more or less material was consumed than planned.
3. Total Direct Materials Cost Variance: Combines the price and quantity variances to determine the overall variation in material costs, indicating whether the total cost is higher or lower than anticipated.
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