qs 21-7 (algo) direct materials variances lo p3

a company reports the following for one of its products.

direct materials standard (10 pounds @ $9 per pound): $ 90 per unit
actual units produced: 20,000 units
actual cost of direct materials used: $ 1,824,000

compute the total direct materials variance and identify it as favorable or unfavorable.
note: indicate the effect of the variance by selecting favorable, unfavorable, or no variance.

direct materials variance:

Question

qs 21-7 (algo) direct materials variances lo p3

a company reports the following for one of its products.

direct materials standard (10 pounds @ $9 per pound): $ 90 per unit
actual units produced: 20,000 units
actual cost of direct materials used: $ 1,824,000

compute the total direct materials variance and identify it as favorable or unfavorable.
note: indicate the effect of the variance by selecting favorable, unfavorable, or no variance.

direct materials variance:

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "blank_filling_formatter", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [ "Total Cost Variance" ], "new_concepts": [ "Direct Materials Variance" ], "current_concepts": [ "Total Cost Variance", "Direct Materials Variance" ] } ## Calculate the standard cost of direct materials for actual production $$ \begin{aligned} \text{Standard Cost} &= \text{Actual Units Produced} \times \text{Standard Cost per Unit} \ &= 20,000 \times \$90 \ &= \$1,800,000 \end{aligned} $$ ## Compute the total direct materials variance $$ \begin{aligned} \text{Direct Materials Variance} &= \text{Actual Cost} - \text{Standard Cost} \ &= \$1,824,000 - \$1,800,000 \ &= \$24,000 \end{aligned} $$ ## Determine the variance favorability $$ \begin{aligned} &\text{Since Actual Cost } (\$1,824,000) > \text{Standard Cost } (\$1,800,000), \ &\text{the variance is Unfavorable.} \end{aligned} $$ Direct materials variance: \$24,000 Unfavorable { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "Direct Materials Variance" ] }

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Question

Explanation:

Calculate the standard cost of direct materials for actual production

Compute the total direct materials variance

Determine the variance favorability

Answer: