Question

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the total direct materials variance.

Answer 1

Answer:

Total Material Variance = $220 Favorable

Explanation:

As for the information provided:

The Total direct material variance = Actual cost - Standard Cost

Here, in the given instance :

Actual cost = $17,280

Standard Cost shall be

35,000 $\times$ 0.5 pounds = Standard quantity = 17,500 pounds

Price per pound = $1

Cost of 17,500 pounds = $1 $\times$ 17,500 pounds = $17,500

Now the Total Material Variance shall be computed as:

$17,280 - $17,500 = $220 Favorable

This variance is favorable as the budgeted standard cost is more than the actual cost incurred for materials.