SITO Elevator Company manufactures small hydroelectric elevators with a maximum

Question

SITO Elevator Company manufactures small hydroelectric elevators with a maximum capacity of ten passengers. One of the direct materials used is heavy-duty carpeting for the floor of the elevator. The direct materials quantity standard for April was 8 square yards per elevator. During April, the purchasing agent purchased this carpeting at $11 per square yard; the standard price for the period was $12. Ninety elevators were completed and sold during the month; the Production Department used an average of 8.5 square yards of carpet per elevator. Calculate the company's direct materials price and quantity variances for carpeting for April and state whether it is favorable, unfavorable, or has no effect.

Explanation / Answer

1. DM Price variance is $1 per sq yd Favorable, but we need to know how much was purchased in April in order to get total amount.

2. DM Quantity variance is .5 sq yds Unfavorable x 90 units x $12 = $540 Unfavourable

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