Asked by Massiel Toribio Peralta on Jun 21, 2024
Verified
Aquatic Corp.'s standard material requirement to produce one Model 2000 is 15 pounds of material at $110 per pound. Last month, Aquatic purchased 170,000 pounds of material at a total cost of $17,850,000. It used 162,000 pounds to produce 10,000 units of Model 2000.
Determine the direct materials price variance and direct materials quantity variance, and indicate whether each variance is favorable or unfavorable.
Direct Materials Price Variance
A measure used in cost accounting that calculates the difference between the actual cost of direct materials and the standard cost expected to be incurred.
Direct Materials Quantity Variance
A measure used in cost accounting to indicate the variance between the actual quantity of materials used and the standard quantity expected to be used in production.
Standard Material Requirement
The predetermined amount of materials specified for the production of a single unit of product, often used in budgeting and controlling costs.
- Master the fundamentals and calculations involved in direct materials price variance.
- Master the understanding and computation related to direct materials quantity variance.
Verified Answer
NS
Nadia SwendehJun 21, 2024
Final Answer :
Actual Cost = $17,850,000 ÷ 170,000 pounds = $105 per pound
Direct Materials Price Variance = ($105 - $110) × 170,000 = $(850,000) favorable
Direct Materials Quantity Variance = [162,000 - (15 × 10,000)] × $110 = $1,320,000 unfavorable
The following data are given for Taylor Company:![Actual Cost = $17,850,000 ÷ 170,000 pounds = $105 per pound Direct Materials Price Variance = ($105 - $110) × 170,000 = $(850,000) favorable Direct Materials Quantity Variance = [162,000 - (15 × 10,000)] × $110 = $1,320,000 unfavorable The following data are given for Taylor Company: Overhead is applied based on standard labor hours.](https://d2lvgg3v3hfg70.cloudfront.net/TB7934/11eb2346_5839_86f2_aa27_9b557dd974a2_TB7934_00.jpg)
Overhead is applied based on standard labor hours.
Direct Materials Price Variance = ($105 - $110) × 170,000 = $(850,000) favorable
Direct Materials Quantity Variance = [162,000 - (15 × 10,000)] × $110 = $1,320,000 unfavorable
The following data are given for Taylor Company:
Overhead is applied based on standard labor hours.
Learning Objectives
- Master the fundamentals and calculations involved in direct materials price variance.
- Master the understanding and computation related to direct materials quantity variance.