Thrope, Inc. purchased 2,400 pounds of direct material at a price of $1.30 per pound. The standard price of the material is $1.40 per pound. Thrope used 1,200 pounds in production while the standard pounds allowed for actual production was 900. Calculate the direct materials price and quantity variances and indicate whether the variances are favorable or unfavorable. Direct material price variance $ Direct material quantity variance $

Instructions are below.

Explanation:

Giving the following information:

Standard price= $1.4 per pound

Thrope, Inc. purchased 2,400 pounds of direct material for $1.30 per pound.

Thrope used 1,200 pounds in production while the standard pounds allowed for actual production was 900.

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= (1.4 - 1.3)*2,400= $240 favorable

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

Direct material quantity variance= (900 - 1,200)*1.4= $420 favorable

Price variance   $240  Favorable

Quantity variance   $ 420  unfavourable

Explanation:

A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite.

                                                                                    $

2,400 pounds should have cost (2400×$1.40) =   3360

but did cost (actual cost )          = (2400×$1.30) =   3120

Price variance                                                            240  Favorable

Quantity variance

It is determined by the difference between the actual and standard quantity of material for the actual level of output multiplied by the the standard price  

                                                                          Pounds

standard allowed production                          900

Actual quantity used                                        1,200

Difference                                                           300

Standard price                                               × $1.40

Quantity variance                                             $420   unfavourable

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