We appreciate your visit to Ed Co manufactures two types of O rings large and small Both rings use the same material but require different amounts The standard materials for. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
The direct materials price variance is -$1,950, the direct materials quantity variance is -$120, and the total direct materials cost variance is -$2,070. All variances are unfavorable as actual costs are higher than standard costs.
The question involves computing the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance for Ed Co. based on their production of O rings. To solve this, we first need to calculate the standard cost per foot of rubber and compare it to the actual cost paid. Next, we determine the standard quantity for the actual production and compare it to the actual quantity used.
Direct Materials Price Variance
Standard cost per foot = $0.20
Actual cost per foot = $7,150 / 26,000 feet = $0.275
Price variance = (Standard cost - Actual cost) x Actual quantity purchased
Price variance = ($0.20 - $0.275) x 26,000 feet
Price variance = -$1,950 (Unfavorable)
Direct Materials Quantity Variance
Standard quantity for large O rings = 3 feet x 3,000 rings = 9,000 feet
Standard quantity for small O rings = 1.25 feet x 4,000 rings = 5,000 feet
The total standard quantity = 9,000 feet + 5,000 feet = 14,000 feet
Quantity variance = (Standard quantity - Actual quantity) x Standard cost per foot
Quantity variance = (14,000 feet - 14,600 feet) x $0.20/foot
Quantity variance = -$120 (Unfavorable)
Total Direct Materials Cost Variance
Total cost variance = Price variance + Quantity variance
Total cost variance = -$1,950 (Price) - $120 (Quantity)
Total cost variance = -$2,070 (Unfavorable)
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