For another dataset, AQ × SP = $145,000 and SQ × SP = $152,000. Compute the direct materials quantity variance and its sign.

For another dataset, AQ × SP = $145,000 and SQ × SP = $152,000. Compute the direct materials quantity variance and its sign.

• A. $7,000 F
• B. $7,000 U
• C. $0
• D. $2,000 F

Answer: (A)

Direct materials quantity variance captures how efficiently material quantity was used compared with what the standard quantity would allow for actual output, valued at the standard price per unit. It is calculated by comparing the cost of actual quantity at the standard price with the standard cost for the actual output: MQV = (AQ × SP) − (SQ × SP). Here, AQ × SP is 145,000 and SQ × SP is 152,000. So MQV = 145,000 − 152,000 = −7,000. The negative sign shows that actual usage was less than the standard allowed, which is favorable. Thus, the direct materials quantity variance is 7,000 favorable.

Direct materials quantity variance captures how efficiently material quantity was used compared with what the standard quantity would allow for actual output, valued at the standard price per unit. It is calculated by comparing the cost of actual quantity at the standard price with the standard cost for the actual output: MQV = (AQ × SP) − (SQ × SP).

Here, AQ × SP is 145,000 and SQ × SP is 152,000. So MQV = 145,000 − 152,000 = −7,000. The negative sign shows that actual usage was less than the standard allowed, which is favorable. Thus, the direct materials quantity variance is 7,000 favorable.