   Chapter 13, Problem 22CDQ

Chapter
Section
Textbook Problem

a. What are the two variances between the actual cost and the standard cost for direct materials? b. Discuss some possible causes of these variances.

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

To Indicate:

Two variances between the material actual and standard costs and possible causes for these variances

Explanation

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:

Direct material rate variance = (Actual rate – Standard rate) ×Actual Quantity

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:

Direct material usage variance = (

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