Chapter 21, Problem 8QS

To determine

Direct Materials Price and Quantity Variance:

Direct material price variance is said to occur when the actual costs of direct material incurred for production is different from that of the projected budget of direct materials price. Through the direct materials price variance the production process may be become more effective and efficient by taking corrective measures against unfavorable price variances.

Direct material quantity variance takes place when the actual quantity of direct materials required to generate a certain level of output is higher than the pre-determined or budgeted quantity of direct materials. The wastage or shortage of raw materials quantity can be analyzed through this variance and thus can be fixed.

Direct material price and quantity variance and classify them as favorable and unfavorable.