2a) the standard material costs of finished product X are as follows 2kg raw material Y @R10 per kg Actual information Purchases of raw material Y 1000kg @R9, 50 per kg Issues of raw material Y 600 kg Units of product X manufactured 290 units Calculate the following variances in respect of material i) Purchase price variance ( 5) ii) Issue price variance (5) iii) Quantity variance (5) iv) Total material variance if an issue price variance is used (5)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Given the following information:
2a) the
2kg raw material Y @R10 per kg
Actual information Purchases of raw material Y 1000kg @R9, 50 per kg
Issues of raw material Y 600 kg
Units of product X manufactured 290 units
Calculate the following variances in respect of material
i) Purchase price variance ( 5)
ii) Issue price variance (5)
iii) Quantity variance (5)
iv) Total material variance if an issue price variance is used (5)
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