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Question 22.1: Tip Top Corp. produces a product that requires six standard ...

Tip Top Corp. produces a product that requires six standard pounds per unit. The standard price is $4.50 per pound. If 3,000 units required 18,500 pounds, which were purchased at $4.35 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?

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a. Direct materials price variance (favorable)                      –$2,775 [($4.35 – $4.50) × 18,500 pounds]

b. Direct materials quantity variance (unfavorable)             $2,250 [(18,500 pounds – 18,000 pounds*) × $4.50]

c. Direct materials cost variance (favorable)                        –$525 [($2,775) + $2,250] or [($4.35 × 18,500 pounds)

    – ($4.50 × 18,000 pounds)] = $80,475 – $81,000

*3,000 units × 6 pounds

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