The following information is available for Bear Manufacturing Company. -- Direct

Question

The following information is available for Bear Manufacturing Company.

-- Direct materials price standard is $3.50 per pound.

-- Direct materials quantity standard is six pounds per finished unit.

-- Budgeted production is 25,000 finished units.

-- 175,000 pounds of direct materials were purchased for $550,000.

-- 175,000 pounds of direct materials were used in production.

-- 26,000 finished units of product were produced.

What is the direct materials quantity variance?

A) $25,400 Unfavorable

B) $25,400 Favorable

C) $66,500 Unfavorable

D) $66,500 Favorable

Explanation / Answer

This variance arises due to deviation caused from the standard due to difference in quantities used. It is that portion of material cost variance which is due to the difference between the standard quantities specified and the actual quantity used.

Direct material usages variance = (standard quantity for actual output - actual quantity) * standard price

Where,

                 Standard quantity = 156000 units

                 Actual quantity = 175000 units

                 Standard price = $3.5 /units

Let's put all the values in the formula,

DMU variance = (156000 - 175000)* 3.5

                             = -19000* 3.5

                             = -66500     Unfavourable

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