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Direct Materials Variances The following data relate to the direct materials cost for the production of 50,000 automobile tires:
Actual: 725,000 lbs. at $3.00 per lb.
Standard: 730,000 lbs. at $2.95 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 $
Direct Materials Quantity Variance $
Total Direct Materials Cost Variance $

b. The direct materials price variance should normally be reported to the . When lower amounts of direct materials are used because of production efficiencies, the variance would be reported to the . When the favorable use of raw materials is caused by the purchase of higher-quality raw materials, the variance should be reported to the _______.

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Answer:

A)

Direct Materials Price Variance is - $36250

Direct Materials Quantity Variance is $14750

Total direct materials variance is -$21500

Explanation:

Given that:

Actual quantity (AQ) = 725000 lbs, Actual price (AP) = $3.00 per lb, Standard quantity (SQ) = 730000 lbs and Standard price (SP) = $2.95 per lb.

A)

Direct Materials Price Variance = (SP – AP) x AQ = ($2.95 per lb - $3.0 per lb) × 725000 lbs = - $36250 unfavorable variance

Direct Materials Quantity Variance = (SQ – AQ) x SP = (730000 lbs - 7250000 lbs) × $2.95 per lb = $14750 favorable variance

Total direct materials variance = (SP x SQ) – (AP x AQ) = ($2.95 per lb × 730000 lbs) - ($3.00 per lb × 725000 lbs) = $2,153,500 - $2,175,000 = -$21500 unfavorable variance

B)

The direct materials quantity variance should 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. However, 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.  The total materials cost variance should be reported to senior plant management,  such as the plant manager or materials manager.

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