4. The following data relate to the direct materials cost for the production of 2,300 automobile tires:- **Actual:** 58,700 lb. at $1.90- **Standard:** 60,500 lb. at $1.95---### Questions:**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:** $ _______ [Dropdown: Favorable/Unfavorable]- **Quantity Variance:** $ _______ [Dropdown: Favorable/Unfavorable]- **Total Direct Materials Cost Variance:** $ _______ [Dropdown: Favorable/Unfavorable]**b.** The direct materials price variance should normally be reported to the _______ [Dropdown]. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the _______ [Dropdown]. If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the _______ [Dropdown].---### Explanation of Formulas:1. **Price Variance** is calculated as: \[ \text{(Actual Price - Standard Price) × Actual Quantity} \]2. **Quantity Variance** is calculated as: \[ \text{(Actual Quantity - Standard Quantity) × Standard Price} \]3. **Total Direct Materials Cost Variance** is the sum of Price and Quantity Variances.The dropdown options for each variance indicate whether the result is favorable or unfavorable, which is determined based on how the actual costs compare to standard costs.### Reporting Guidelines:- **Variance Reporting:** Determine which department or management level should receive reports on each type of variance to better align with operational and financial oversight within the company.

Direct Material price variance = (Actual price per pound - Standard price per pound)*Actual quantity purchased Direct Material quantity variance = (Actual quantity used - Standard quantity allowed)*Standard rate per pound Total Direct Materials Cost Variance = Actual Direct Materials Cost - Standard Direct Materials Costa. Direct materials price variance = (actual price - standard price) x actual quantity =(1.90-1.95)*58700 = $-2935 Favorable Direct materials quantity variance = (Actual quantity - standard quantity) x standard price = (58700-60500)*1.95 = $3510 Favorable Total Direct Materials Cost Variance = Actual Direct Materials Cost - Standard Direct Materials Cost = (58700*1.90)-(60500*1.95) = $-6445 Favorable 2. The direct materials price variance should normally be reported to the Purchasing Department. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production Supervisor. If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department.

Business

Accounting

The following data relate to the direct materials cost for the production of 2,300 automobile tires: Actual: 58,700 Ib. at $1.90 Standard: 60,500 Ib. at $1.95 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 b. The direct materials price variance should normally be reported to the If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the

The following data relate to the direct materials cost for the production of 2,300 automobile tires: Actual: 58,700 Ib. at $1.90 Standard: 60,500 Ib. at $1.95 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 b. The direct materials price variance should normally be reported to the If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

100%

The following data relate to the direct materials cost for the production of 2,300 automobile tires:

- **Actual:** 58,700 lb. at $1.90
- **Standard:** 60,500 lb. at $1.95

---

### Questions:

**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:** $ _______ [Dropdown: Favorable/Unfavorable]
- **Quantity Variance:** $ _______ [Dropdown: Favorable/Unfavorable]
- **Total Direct Materials Cost Variance:** $ _______ [Dropdown: Favorable/Unfavorable]

**b.** The direct materials price variance should normally be reported to the _______ [Dropdown]. If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the _______ [Dropdown]. If the favorable use of raw materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the _______ [Dropdown].

---

### Explanation of Formulas:

1. **Price Variance** is calculated as:
\[
\text{(Actual Price - Standard Price) × Actual Quantity}
\]

2. **Quantity Variance** is calculated as:
\[
\text{(Actual Quantity - Standard Quantity) × Standard Price}
\]

3. **Total Direct Materials Cost Variance** is the sum of Price and Quantity Variances.

The dropdown options for each variance indicate whether the result is favorable or unfavorable, which is determined based on how the actual costs compare to standard costs.

### Reporting Guidelines:

- **Variance Reporting:** Determine which department or management level should receive reports on each type of variance to better align with operational and financial oversight within the company.

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