Hsu Company produces a part with a standard of 5 yards of material per unit. The standard price of one yard of material is $8.50. During the month, 8,800 parts were manufactured, using 45,700 yards of material at a cost of $8.30.



Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

Instructions are below.

Explanation:

Giving the following information:

Standard quantity = 5 yards of material per unit.

The standard price = $8.50 per yard

During the month, 8,800 parts were manufactured, using 45,700 yards of material at a cost of $8.30.

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance = (standard price - actual price) * actual quantity

Direct material price variance = (8.5 - 8.3) * 45,700

Direct material price variance = $9,140 favorable

Direct material quantity variance = (standard quantity - actual quantity) * standard price

Standard quantity = 8,800*5 = 44,000

Direct material quantity variance = (44,000 - 45,700) * 8.5

Direct material quantity variance = $14,450 unfavorable

Total direct material cost = 9,140 - 14,450 = $5,310 unfavorable