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

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