Suppose 6 comma 100 square yards of materials were purchased (at $ 5.30 per square yard), even though only 3 comma 800 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach.

Instructions are below.

Explanation:

Giving the following information:

Suppose 6,100 square yards of materials were purchased (at $ 5.30 per square yard), even though only 3,800 square yards were used.

We weren't provided with enough information to answer. But, I will invent a small example to complete information and give the formulas.

Standard cost per square yard= $5.60

Standard square yard per unit= 4

Units produced= 760

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= (5.6 - 5.3)*6,100

Direct material price variance= $1,830 favorable

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

Direct material quantity variance= (4*760 - 3,800)*5.6

Direct material quantity variance= (3,040 - 3,800)*5.6

Direct material quantity variance= $4,256 unfavorable

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explanation: