Direct Materials Variances
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. |
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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.
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| 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 .
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Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).
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The direct material cost variance is the difference between the actual and standard material cost per quantity.
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