Direct Material Price Variance

Direct Material Price Variance is the difference between the actual cost of direct material and the standard cost of quantity purchased or consumed (Accounting-Simplified.com, 2014). With this particular analysis, I was not sure if the calculations were correct, but from what I gathered, the standard cost was $149.00 less than the actual cost. The standard costs are not that far off from the actual cost. It seems that it is just hundreds of dollars apart from each other. This particular analysis is favorable to the business. It seems that with the labor efficiency variance the company is motivated to get the work done and that even though the standard cost is 600.00 less than the actual cost. The employees handle producing the 500 massage chairs without losing moral or motivation and produced the product without going extremely over the standard cost. If it was adverse labor efficiency, I would have an investigation conducted to find out the problem and what went wrong, when producing the 500 massage chairs.

From this analysis, Spine Line is doing something right as far as keeping the moral up and the cost fairly down, while having to produce a large amount of massage chairs. The variance analysis shows that the organization is on the right track and there is not much to improve. Being a few hundred dollars off from the standard cost is very cost efficient. I am not quite sure about the calculations, but if I had to investigate anything, it would be the data collected for the analysis.

Reference

Accounting-Simplified.com. Direct price variance. Retrieved from http://accounting-simplified.com/management/variance-analysis/material/price.html#sthash.Rd68NQNR.dpuf

Zimmerman, J. L. (2014). Accounting for decision making and control (8th ed.). New York, NY: McGraw-Hill.