ABC Company's production budget for October is based on 500 units. Standard unit cost for raw materials is $130 per unit ($10 per pound x 13 pounds per unit). ABC's actual production in October = 525 units. The actual cost of materials used = $69,300 ($11 per pound x 12 pounds per unit). Calculate the raw materials usage variance for October: Is the cariance Favorable or Unfavorable
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.
ABC Company's production budget for October is based on 500 units.
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