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    RosieJ74's Avatar
    RosieJ74 Posts: 33, Reputation: 2
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    #1

    Apr 25, 2006, 02:31 PM
    Direct Material Variances
    What type would it be if the price and quantity arose if the actual number of lbs of materials used exceeds standards lbs aalowed but actual cost is less than the standard cost?

    I think that the quantity would be favorable and the price would be unfavorable.

    Am I correct?
    arunavcd's Avatar
    arunavcd Posts: 89, Reputation: 3
    Junior Member
    		  
    #2

    May 13, 2006, 03:51 AM
    Sorry to say that but the truth is You are confusing yourself.

    You can't simply answer that. The answer would be DEPENDS ON THE FIGURE.

    Direct material Variance has two elements. Price and Usage.

    The formula for Direct Material Price Variance is = Direct Material Purchased/used (take higher one)* [Std price/lb - Actual price/lb)

    In the above formula, Price is the main factor which can give you favourable or adverse.

    Formula for Direct Material Usage Variance is = Std price/lb * [Std Quantity - Actual Quantity Used]

    Here the formula varies with the changes in Quantity.

    Now, how to answer your question?
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