Activity #2-DM Variances Use the following information from Activity w1 Direct materials per awning 22.0 yards at $13.00 per yard Purchased 51,260 yards of material at a total cost of $661,254 Used 47,500 yards in producing 2,200 awnings You will NOT be given these formulas on the exam: DM Price Variance - Actual Quantity Purchased X (Actual Price - Standard Price) DM Quantity Variance - Standard Price X (Actual Quantity Used Standard Quantity Allowed) Calculate the DM Price Variance. Indicate whether it is favorable or unfavorable. MPV 1. 2. Calculate the DM Quantity Variance. Indicate whether it is favorable or unfavorable. Std Quantity Allowed - MOV 3. If you add up these two variances, does it total to the DM flexible budget variance we calculated in Activity 1? Why or why not? 4. Speculate as to what may have caused the DM variances. The favorable DM price variance shows that less was paid for the raw material than was budgeted. The favorable DM quantity wariance shows that less of the raw material was used in production than was budgeted for the amount we produced. Prices may have decreased from our standard; may have decreased as we produced more so we may have gotten quantity discounts. May have been more efficient with awning production