Direct Materials Variances Dvorak Company produces a product that requires 5 standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

(a) 2,250 unfavorable

(b) $1,250 favorable

(c) $1,000 unfavorable

Explanation:

(a) Material price variance:

= Actual quantity (Standard price - actual price)

= 4,500 (2.50 - 3.00)

= $2,250 unfavorable

(b) Material quantity variance:

= Standard price (standard quantity - actual quantity)

= 2.50 (5,000 - 4,500)

= $1,250 favorable

(c) Material cost variance:

= Standard cost - Actual cost

= 12,500 - 13,500

= $1,000 unfavorable

Material cost variance = Material price variance + Material quantity variance

= 2,250 + (-1,250)

= $1,000