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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Direct materials variances

The following data relate to the direct materials cost for the production of 20,000 automobile tires:

a.Determine the price variance, quantity variance, and total direct materials cost variance.
b. To whom should the variances be reported for analysis and control?

To determine

Concept Introduction:

Direct material variances:

Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories:

  1. Direct material Rate variance: this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows:
  2.   Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

  3. Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows:
  4.   Direct material usage variance = (Actual Quantity – Standard Quantity)×Standard rate

  5. Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows:
  6.   Direct material cost variance = Direct material rate variance + Direct material usage variance

Requirement-1:

To Calculate:

The Direct Material Price, Quantity and Cost variances

Explanation

The Direct Material Price, Quantity and Cost variances are calculated as follows:

    Direct Material Price Variance:
    Actual Price (A) $ 2.65 Per lbs
    Standard Price (B) $ 2.50 Per lbs
    Actual Quantity (C) 80000Ounces
    Direct Material Price Variance (D)= (A-B)*C = $ 12,000.00 Unfavorable
To determine

Concept Introduction:

Direct material variances:

Direct material variances refer to the difference between the standard direct material cost and actual direct material cost incurred. Direct material cost variances are categorized into following two categories:

  1. Direct material Rate variance: this variance shows the difference of standard rate and actual rate of material. The formula to calculate this variance is as follows:
  2.   Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

  3. Direct material usage variance: this variance shows the difference of standard usage and actual usage of material. The formula to calculate this variance is as follows:
  4.   Direct material usage variance = (Actual Quantity – Standard Quantity)×Standard rate

  5. Direct material cost variance: this variance shows the difference of standard cost and actual cost of material. The formula to calculate this variance is as follows:
  6.   Direct material cost variance = Direct material rate variance + Direct material usage variance

Requirement-2:

To Indicate:

The Person to whom the variances should be reported

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Chapter 13 Solutions

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Ch-13 P-6CDQCh-13 P-7CDQCh-13 P-8CDQCh-13 P-9CDQCh-13 P-10CDQCh-13 P-11CDQCh-13 P-12CDQCh-13 P-13CDQCh-13 P-14CDQCh-13 P-15CDQCh-13 P-16CDQCh-13 P-17CDQCh-13 P-18CDQCh-13 P-19CDQCh-13 P-20CDQCh-13 P-21CDQCh-13 P-22CDQCh-13 P-23CDQCh-13 P-24CDQCh-13 P-25CDQCh-13 P-26CDQCh-13 P-13.1ECh-13 P-13.2ECh-13 P-13.3ECh-13 P-13.4ECh-13 P-13.5ECh-13 P-13.6ECh-13 P-13.7ECh-13 P-13.8ECh-13 P-13.9ECh-13 P-13.10ECh-13 P-13.11ECh-13 P-13.12ECh-13 P-13.13ECh-13 P-13.14ECh-13 P-13.15ECh-13 P-13.16ECh-13 P-13.17ECh-13 P-13.18ECh-13 P-13.19ECh-13 P-13.20ECh-13 P-13.21ECh-13 P-13.22ECh-13 P-13.23ECh-13 P-13.24ECh-13 P-13.25ECh-13 P-13.26ECh-13 P-13.27ECh-13 P-13.28ECh-13 P-13.29ECh-13 P-13.30ECh-13 P-13.1.1PCh-13 P-13.1.2PCh-13 P-13.1.3PCh-13 P-13.1.4PCh-13 P-13.2.1PCh-13 P-13.2.2PCh-13 P-13.2.3PCh-13 P-13.2.4PCh-13 P-13.2.5PCh-13 P-13.2.6PCh-13 P-13.2.7PCh-13 P-13.2.8PCh-13 P-13.3.1PCh-13 P-13.3.2PCh-13 P-13.4PCh-13 P-13.5PCh-13 P-13.6.1PCh-13 P-13.6.2PCh-13 P-13.6.3PCh-13 P-13.6.4PCh-13 P-13.6.5PCh-13 P-13.6.6PCh-13 P-13.7PCh-13 P-13.1.1MBACh-13 P-13.1.2MBACh-13 P-13.1.3MBACh-13 P-13.1.4MBACh-13 P-13.1.5MBACh-13 P-13.1.6MBACh-13 P-13.2.1MBACh-13 P-13.2.2MBACh-13 P-13.2.3MBACh-13 P-13.2.4MBACh-13 P-13.2.5MBACh-13 P-13.3.1MBACh-13 P-13.3.2MBACh-13 P-13.3.3MBACh-13 P-13.3.4MBACh-13 P-13.4.1MBACh-13 P-13.4.2MBACh-13 P-13.4.3MBACh-13 P-13.4.4MBACh-13 P-13.5.1MBACh-13 P-13.5.2MBACh-13 P-13.5.3MBACh-13 P-13.5.4MBACh-13 P-13.6.1MBACh-13 P-13.6.2MBACh-13 P-13.6.3MBACh-13 P-13.7.1MBACh-13 P-13.7.2MBACh-13 P-13.7.3MBACh-13 P-13.1CCh-13 P-13.2.1CCh-13 P-13.2.2CCh-13 P-13.3.1CCh-13 P-13.3.2CCh-13 P-13.4CCh-13 P-13.5.1CCh-13 P-13.5.2CCh-13 P-13.6CCh-13 P-13.7C

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