Gala Enterprises reports the following information regarding the production of one of its products for the month. Compute the total direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or unfavorable.Direct materials standard (6 lbs. @ $3/lb.)$18 per finished unitActual direct materials used179,000 lbs.Actual finished units produced30,000 unitsActual cost of direct materials used$554,900
What will be an ideal response?
Direct materials cost variance:
Actual units at actual cost = $554,900
Standard units at standard cost = 30,000 ? 6 lbs. ? $3 = $540,000
Direct materials cost variance = $14,900 unfavorable
Direct materials price variance:
AQ ? AP = 179,000 ? $3.10 = $554,900
AQ ? SP = 179,000 ? $3.00 = $537,000
Direct materials price variance = $17,900 unfavorable
Direct materials quantity variance:
AQ ? SP = 179,000 ? $3.00 = $537,000
SQ ? SP = 30,000 ? 6 ? $3.00 = $540,000
Direct materials quantity variance = $3,000 favorable
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