PE 23-1B direct materials variances

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