In reviewing activity for July the controller of Mathis Inc

In reviewing activity for July, the controller of Mathis, Inc., collected the following data concerning direct materials: Actual production Direct materials purchased (actual) Standard cost of materials purchased Standard direct materials costs per unit produced Standard price times actual amount of materials used S 104.400 units $1,645,600 1,561,000 14.4 $1,412,950 Required: Compute the direct materials cost variances. (Indicate the effect of each variance by selecting \"F\" for favorable, or \"U\" for unfavorable. If there is no effect, do not select either option.) Direct Materials Price variance Efficiency variance Cost variances

Solution

Direct Materials Price Variance = Actual direct materials cost - Standard cost of materials purchased
Direct Materials Price Variance = $1,645,600 - $1,561,000
Direct Materials Price Variance = $84,600 Unfavorable

Direct Materials Efficiency Variance = Standard price times actual amount of materials used - Standard direct materials costs per unit produced * Actual production
Direct Materials Efficiency Variance = $1,412,950 - $14.40 * 104,400
Direct Materials Efficiency Variance = $90,410 Favorable

Direct Materials Cost Variances = Direct Materials Price Variance + Direct Materials Efficiency Variance
Direct Materials Cost Variances = $84,600 Unfavorable + $90,410 Favorable
Direct Materials Cost Variances = $5,810 Favorable