Chapter 11, Problem 11.19AE

Calculate and explain direct material variances (Learning Objective 2)

World Class Rings produces class rings. Its best-selling model has a direct materials standard of 16 grams of a special alloy per ring. This special alloy has a standard cost of $63,30 per gram. In the past month, the company purchased 16.800 grams of this alloy at a total cost of $1,061,760. A total of 16,300 grams were used last month to produce 1,000 rings.

Requirements

1. 1. What is the actual cost per gram of the special alloy that World Class Rings purchased last month?
2. 2. What is the direct material price variance?
3. 3. What is the direct material quantity variance?
4. 4. How might the direct material price variance for the company last month be causing the direct material quantity variance?