The following data relate to the direct materials cost for the production of 2,200 automobile tires:
|Actual:||53,100 lbs. at $2.05 per lb.|
|Standard:||52,000 lbs. at $2 per lb.|
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Direct Materials Price Variance||$||Unfavorable|
|Direct Materials Quantity Variance||$||Unfavorable|
|Total Direct Materials Cost Variance||$||Unfavorable|
b. 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 .
Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).
The direct material cost variance is the difference between the actual and standard material cost per quantity.
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