Question

qs 21 - 10 (algo) direct materials price and quantity variances lo p3
for the current period, juan companys standard cost of direct materials is $100,000. the direct materials variances consist of a $16,000 favorable price variance and a $2,300 favorable quantity variance. what is the actual cost of direct materials?
actual cost of direct materials

Explanation:

Step1: Recall the formula for direct materials variance

The formula for direct materials variance is \( \text{Direct Materials Variance}=\text{Price Variance}+\text{Quantity Variance}\). Also, \( \text{Actual Cost}=\text{Standard Cost}-\text{Direct Materials Variance}\) (since variances are favorable).

Step2: Calculate the direct materials variance

The price variance is \(\$16,000\) favorable and the quantity variance is \(\$2,300\) favorable. So, the direct materials variance \(V = 16000 + 2300=\$18,300\) favorable.

Step3: Calculate the actual cost

The standard cost of direct materials is \(SC=\$100,000\). Using the formula \(AC = SC - V\), we substitute the values: \(AC=100000- 18300\).

Answer:

\( \$81,700\)