Variance Analysis

Direct Materials Variances The following data relate to the direct materials cost for the production of 1,800 automobile tires: Actual: 53,400 lbs. at $2 per lb. Standard: 54,500 lbs. at $2.05 per lb a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number Direct Materials Price Variance Direct Materials Quantity Variance Total Direct Materials Cost Variance b. The direct materials price variance should normally be reported to the Purchasing Department If lower amounts of direct materials had been used because of production efficiencies, the variance would be reported to the Production Supervisor If the favorable use of raw Favorable Favorable Favorable materials had been caused by the purchase of higher-quality raw materials, the variance should be reported to the Purchasing Department Direct Labor Variances The following data relate to labor cost for production of 5,800 cellular telephones Actual: 3,950 hrs. at $15.3 Standard: 3,890 hrs. at $15.6 a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Rate variance Time variance Total direct labor cost variance b. The employees may have been less-experienced or poorly trained, thereby resulting in a lower labor rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus, the actual time required was more than standard. Favorable Unfavorable Favorable