The standard cost of Product B manufactured by Gomez Company includes three unit

Question

The standard cost of Product B manufactured by Gomez Company includes three units of direct materials at $5.00 per unit. During June, the company purchases 28,000 units of direct materials at a cost of $4.70 per unit and uses 28,000 units of direct materials to produce 9,000 units of Product B. Calculate the total direct materials variance: Is it favourable or unfavourable? Calculate the direct materials price variance: Is it favourable or unfavourable? Calculate the direct materials quantity variance: Is it favourable or unfavourable?

Explanation / Answer

Ans. SQ Units SP SC AQ (units) AP AC (9000 * 3) 27000 5 135000 28000 4.7 131600 1 Total Direct Materials Variance = Standard Cost - Actual cost 135000 - 131600 3400 It is Favourable. 2 Direct material Price variance = (SP - AP) * AQ (5 - 4.70) * 28000 8400 It is Favourable. 3 Direct material Quantity variance = (SQ - AQ) * SP (27000 - 28000) * 5 -5000 It is Unfavourable.

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