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Answer:
The direct material price variance is $4,850 unfavorable , and the direct materials quantity variance is $4,000 unfavorable.
Hence, both variance is unfavorable
Explanation:
Variance : The variance denotes the difference between actual cost and standard cost.
The the direct materials price variance and the direct materials quantity variance are the part of the standard costing.
1. The direct material price variance is calculating by taking a difference between the standard price and actual price which is multiply by the actual quantity.
The equation is given below:
= (Standard Price - Actual Price ) × Actual Quantity
= ($8 per lb. - $8.10 per lb. ) × 48,500 lbs
= -$4,850 unfavorable
Since the amount is negative. so, the direct material price variance is unfavorable.
2. The direct materials quantity variance is computed by multiplying the standard price by taking a difference of standard quantity and actual quantity.
The equation is shown below:
= Standard Price × (Standard Quantity - Actual Quantity)
= $8 per lb × ($48,000 - $48,500)
= -$4,000
The standard quantity = units manufactured × per lbs.
= 8,000 × 6
= $48,000
The direct materials quantity variance shows negative sign. Hence it is unfavorable.
Thus, the direct material price variance is $4,850 unfavorable , and the direct materials quantity variance is $4,000 unfavorable.
Hence, both variance is unfavorable.
The direct materials price variance is $4,850 Unfavorable.
The direct materials quantity variance is $4,000 Unfavorable.
Further explanation:
Variance: The difference between the actual and budgeted figure is termed as the variance. The variance is computed for all the costs and the revenue of the organization.
Direct materials price variance: The difference which arises when the higher price is paid for direct materials than budgeted is termed as direct materials price variance. This variance helps the management in farming decisions about the cost of direct materials. It is computed in the following manner:
[tex]\text{Actual Quantity Purchased}\times\text{(Actual Price}-\text{Standard Price)}[/tex]
Direct materials quantity variance: The variance which arises due to the difference in standards and actual use of direct materials is termed as direct materials quantity variance. It is computed in the following manner:
[tex]\text{Standard Price}\times\text{(Actual Quantity used}-\text{Standard Quantity allowed)}[/tex]
Calculate the direct materials price variance:
It is budgeted to use 6 lbs @$8.00 per lb. The actual quantity used is 48,500 lbs. at a price of $8.10.
[tex]\text{Direct materials price variance}=\text{(Actual Price}-\text{Standard price)}\times\text{Actual Quantity used}\\=(\$8.10-\$8.00)\times48,500\\=\$0.10\times48,500\\=\$4,850\text{ U}[/tex]
Therefore, the direct materials price variance is $4,850 Unfavorable.
The unfavorable variance represents that direct materials have been purchased at a higher price than the standard price.
Calculate the direct materials quantity variance:
8,000 units have been manufactured during the year, and it was budgeted to use 6 lbs. @ $8.00 per lb. But the organization has used 48,500 lbs. during the year.
[tex]\text{Direct materials quantity variance}=\text{(Actual Quantity used}-\text{Standard quantity allowed)}\times\text{Standard price}\\=(48,500-(6 \text{lbs.}\times8,000))\times\$8.00\\=500\times\$8.00\\=\$4,000\text{ U}[/tex]
Therefore, the direct materials quantity variance is $4,000 Unfavorable.
The unfavorable variance represents that more direct materials have been consumed than the standard direct materials.
Learn more
1. Breakeven point and contribution margin https://brainly.com/question/12989446
2. Direct materials efficiency variance https://brainly.com/question/12987884
3. Cost of materials
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Answer details
Grade: Senior School
Subject: Cost Accounting
Chapter: Standard costing
Keywords: A manufactured product, information for June, Actual direct materials, material, lbs, Units manufactured, direct material, direct materials, direct labor, direct materials, materials quantity variance, price variance, variance, direct materials variance, units manufactured, standard quantity, standard price.
