Direct Materials Variances De Soto Inc. produces tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 770 tablets during July. However, due to LCD defects, the company actually used 800 LCD displays during July. Each display has a standard cost of $12.50. Eight hundred LCD displays were purchased for July production at a cost of $9,400. Determine the price variance, quantity variance, and total direct materials cost variance for July.

The price variance for July is $600 favorable the quantity variance is $375 Unfavorable, and total direct materials cost variance is $225 favorable

Explanation:

In order to calculate the Direct material Price variance we would have to use the following formula:

Direct material Price variance = (Standard Price - Actual Price) * Actual quantity purchased

= (12.50-Actual cost) * 800

= 12.50*800 - 9,400

= $600 favorable

In order to calculate the Direct material Quantity Variance we would have to use the following formula:

Direct material Quantity Variance = (Standard Quantity - Actual Quantity) * Standard Price

= (770-800) * 12.50

= $375 Unfavorable

The Direct material cost variance = 600 - 375

= $225 favorable