Direct material variances: Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories: Direct material Rate variance : this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows: Direct material rate variance = ( Actual rate – Standard rate ) × Actual Quantity Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows: Direct material usage variance = ( Actual Quantity – Standard Quantity ) × Standard rate Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows: Direct material cost variance = Direct material rate variance + Direct material usage variance To Indicate: The possible indication if the material price variance is favorable and material quantity variance is unfavorable.

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Answer 1

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 9, Problem 13Q

To determine

Concept Introduction:

Direct material variances: Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories:

Direct material Rate variance: this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows:

Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows:

Direct material usage variance = (Actual Quantity – Standard Quantity)×Standard rate

Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows:

Direct material cost variance = Direct material rate variance + Direct material usage variance

To Indicate:

The possible indication if the material price variance is favorable and material quantity variance is unfavorable.

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If the materials price variance is favorable but the materials quantity variance is unfavorable, what might this indicate?

If the material price variance is favorable but the material quantity variance is unfavorable, what might this indicate?

What is a materials price variance? Describe this in your own words. Writing a formula is not a sufficient answer. Provide a real world example that would result in an unfavorable materials price variance

Answer 2

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 9, Problem 13Q

To determine

Concept Introduction:

Direct material variances: Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories:

Direct material Rate variance: this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows:

Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows:

Direct material usage variance = (Actual Quantity – Standard Quantity)×Standard rate

Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows:

Direct material cost variance = Direct material rate variance + Direct material usage variance

To Indicate:

The possible indication if the material price variance is favorable and material quantity variance is unfavorable.

Expert Solution & Answer

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Answer 3

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 9, Problem 13Q

To determine

Concept Introduction:

Direct material variances: Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories:

Direct material Rate variance: this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows:

Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows:

Direct material usage variance = (Actual Quantity – Standard Quantity)×Standard rate

Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows:

Direct material cost variance = Direct material rate variance + Direct material usage variance

To Indicate:

The possible indication if the material price variance is favorable and material quantity variance is unfavorable.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 9, Problem 13Q

To determine