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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct materials variances

 The following data relate to the direct materials cost for the production of 10,000 automobile tires:

Actual: 145,000 lb. at $2.80
Standard: 150,000 lb. at $2.75

 a.    Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance.

 b.    To whom should the variances be reported for analysis and control?

(a)

To determine

Direct material variances:

The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

    • Direct materials price variance.
    • Direct materials quantity variance.

To determine: The direct materials price variance.

Explanation

The direct materials price variance is determined as follows:

Direct materials price variance = [(Actual priceStandard price)× Actual quan

(b)

To determine
The variances for analysis and control should be reported for which department.

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