Part 7 Variance Analysis (10 marks)

Product X has a standard direct material cost as follows 30 kilograms of material A at $60 per kg

During a period of production, 100 units of X were manufactured, using 2,500 kgs of material A which cost $170,000

Required:

(1) Calculate the following variances: (a) the direct material total variance; (b) the direct material price variance; (c) the direct material usage variance. (6 marks)

(2) Explain the concept of materiality in variance analysis (4 marks)