The standard materials cost to produce 1 unit of Product R is 4 pounds of material at a standard price of $44 per pound. In manufacturing 9,000 units, 35,000 pounds of material were used at a cost of $45 per pound. What is the total direct materials cost variance?
Direct Material Variance:
The direct material cost variance represents the difference between the standard cost of raw materials used for actual production and the actual cost of raw materials incurred. The total direct material cost variance consists of the direct material price variance and the direct material quantity variance.
Answer and Explanation:
The total direct material cost variance is $9,000 Favorable.
As per the data provided about Product R:
- Standard quantity = 36,000 pounds (9,000 units * 4 pounds)
- Standard price = $44 per pound
- Actual quantity = 35,000 pounds
- Actual price = $45 per pound
- Total direct material cost variance = Standard cost of direct materials - Actual cost of direct materials
- Total direct material cost variance = (36,000 pounds * $44) - (35,000 pounds * $45)
- Total direct material cost variance = $1,584,000 - $1,575,000
- Total direct material cost variance = $9,000 Favorable
Note: The variance is favorable because the standard cost is more than the actual cost.
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from Accounting 301: Applied Managerial AccountingChapter 13 / Lesson 3