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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

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

Direct materials variances

 Silicone Engine Inc. produces wrist-worn tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 580 tablets during December. However, due to LCD defects, the company actually used 600 LCD displays during December. Each display has a standard cost of $15.00. Six hundred LCD displays were purchased for December production at a cost of $8,550.

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

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 price variance for the month of December.

Explanation

The price variance is determined as follows:

Direct materials price variance = [(Actual priceStandard price)× Actual quantity]=[($14.25 (1)$15.00)×600]=$0

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