A review of Sunshine’s accounting records at the end of the period disclosed a material usage variance of $3,000 favorable and a material price variance of $4,500 favorable. Sunshine produced 11,000 finished units of product. Each finished unit had a standard of five gallons of direct material, and the standard price per gallon of direct material is $0.3. What was the actual price paid for a gallon of direct material?
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 review of Sunshine’s accounting records at the end of the period disclosed a material usage variance of $3,000 favorable and a material price variance of $4,500 favorable. Sunshine produced 11,000 finished units of product. Each finished unit had a standard of five gallons of direct material, and the standard price per gallon of direct material is $0.3. What was the actual price paid for a gallon of direct material?
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