Friday, October 26, 2018

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?

Answer:

a. Direct materials price 
variance (unfavorable) 
$2,250 [($3.00 – $2.50) × 4,500 lbs.] 
b. Direct materials quantity –$1,250 [(4,500 lbs. – 5,000 lbs.) × $2.50] 
 variance (favorable)   
c. 
Direct materials cost 
variance (unfavorable) 
$1,000 
($2,250 – $1,250) or 
[($3.00 × 4,500 lbs.) – ($2.50 × 5,000 lbs.)] 
= $13,500 – $12,500 

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