Lily

Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is

31

pounds. The company uses a standard cost of

$2.20

per pound of clay.

Lily

produced

2,500

planters in May. In that month,

80,000

pounds of clay were purchased and used at the total cost of $172,000Read the requirements

1.	Calculate the direct material price variance.
2.	Calculate the direct material quantity variance

.

Requirement 1. Calculate the direct material price variance.

Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. 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)

		(		-		)	=	DM price variance
		(		-		)	=