N Company manufactures a kind of product used thr

N Company manufactures a kind of product used throughout the machinery industry.The standard price of the materials for the products is $ 6 per kilogram; the standard quantity of materials allowed per unit is 1.5 kilograms. During July, 2 000 units of the products were finished, for which 3 200 kilograms of materials were used at a total direct material cost of $ 18 560.

Requirment :

A. Calculate the direct material price variance for July. Indicate whether it is favorable (F) or unfavorable (U) and who is generally responsible for this variance.

B. Calculate the direct material quantity variance for July. Indicate whether it is favorable (F) or unfavorable (U) and who is generally responsible for this variance.

C. Calculate the total direct material cost variance for July. Indicate whether it is favorable (F) or unfavorable (U).

Answer:

A. Direct material price variance

= Actual quantity*( actual price - standard price)

=3 200 * (18 560/3 200 -6)

=3 200* (5. 8 -6)

= -640 (F)

Purchasing department

B. Direct material quantity variance= Standard price * ( actual quantity - standard quantity)=6 *(3 200 -2 000 *1.5)= $1 200 (U)

Manufacturing department

C. Total direct material cost variance

= Direct material price variance + Direct material quantity variance

=1 200 - 640 = $ 560 (U)

or = Actual cost - Standard cost

=18 560 - (1. 5*6*2 000)

=$560(U)