is a manufacturer of large flower pots for urban settings. The company has these standards:

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Requirements

1. Compute the direct materials price variance and the direct materials quantity variance.

2. What is the total variance for direct materials?

3. Who is generally responsible for each variance?

4. Interpret the variances.

Direct materials (resin). . . . . . . . . . . . . . . . . . . . . . .

13 pounds per pot at a cost of $4.00

per pound

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.0 hours at a cost of $24.00 per hour

Standard variable manufacturing

overhead rate. . . . . . . . . . . . . . . . . . . . . . . . .

$2.00 per direct labor hour

Budgeted fixed manufacturing overhead. . . . . . . . .

$27,000

Standard fixed MOH rate. . . . . . . . . . . . . . . . . . . . .

$10.00 per direct labor hour (DLH)

allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of

1 comma 5001,500

flower pots:

Direct materials. . . . . . . . . . . . . . . . . . . . .	Purchased 21,100 pounds at a cost of
	$4.40 per pound; Used 20,400 pounds to
	produce 1,500 pots
Direct labor. . . . . . . . . . . . . . . . . . . . . . . .	Worked 2.5 hours per flower pot (3,750
	total DLH) at a cost of $20.00 per hour
Actual variable manufacturing overhead. . . . .	$2.40 per direct labor hour for total
	actual variable manufacturing overhead
	of $9,000
Actual fixed manufacturing overhead. . . . . . .	$26,400
Standard fixed manufacturing overhead
allocated based on actual production. . . . . . .	$30,000

Requirement 1. Compute the direct materials price variance and the direct materials quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable(U). Abbreviations used: DM = Direct materials)

First determine the formula for the price variance, then compute the price variance for direct materials.

		x (		-		)	=	DM price variance
		x (		-		)	=	0

Determine the formula for the quantity variance, then compute the quantity variance for direct materials.

		x (		-		)	=	DM quantity variance
		x (		-		)	=

Requirement 2. What is the total variance for direct materials?

The total variance cannot be calculated due to the purchased quantity being different from the used quantity.

The total variance for direct materials is $9,000 F.

The total variance for direct materials is $26,400 F.

The total variance for direct materials is $27,000 U.

Requirement 3. Who is generally responsible for each variance?

The

marketing

production

purchasing

sales

department is responsible for the materials price variance. The

marketing

purchasing

production

sales

department is responsible for the materials quantity variance.

Requirement 4. Interpret the variances.

The

favorable

unfavorable

materials price variance means that the actual price

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personnel paid for resin

did not exceed

exceeded

the standard budgeted price for resin.

The

favorable

unfavorable

materials quantity variance means that

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employees used

less

more

resin than they should have to produce

1 comma 5001,500

pots.