Tercer reports the following for one of its products. Direct materials standard (4 lbs. $2 per lb.) Actual direct materials used (AQ) Actual finished units produced Actual cost of direct materials used $8 per finished unit 300,000 lbs. 60,000 units $535,000 AQ Actual Quantity SQ Standard Quantity AP Actual Price SP Standard Price. Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.

Results are below.

Explanation:

Giving the following information:

Direct materials standard (4 lbs. $2 per lb.)= $8 per finished unit

Actual direct materials used (AQ)= 300,000

Actual finished units produced= 60,000

Actual cost of direct materials used= $535,000

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= (2 - 1.783)*300,000

Direct material price variance= $65,100 favorable

Actual price= 535,000 / 300,000= $1.783

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

Direct material quantity variance= (4*60,000 - 300,000)*2

Direct material quantity variance= $120,000 unfavorable