A company has the following information in its standard cost card: £ Material 2.5kg at the price of £3/kg = 7.00 During the month the company recorded the following: Units produced = 2,500 units Material used = 7,850kg Material cost = £23,180 Calculate the material price variance. 2. Calculate the material usage variance. 3. Explain what is meant by the breakeven point, and its usefulness to a business.
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.
A company has the following information in its
£
Material 2.5kg at the price of £3/kg = 7.00
During the month the company recorded the following:
Units produced = 2,500 units
Material used = 7,850kg
Material cost = £23,180
- Calculate the material price variance.
2. Calculate the material usage variance.
3. Explain what is meant by the breakeven point, and its usefulness to a business.
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