Adler Industries uses a standard cost system in which direct material is carried at standard cost. Adler has established the following standards for one unit of product: standard quantity of 8 pounds, standard price $1.8 per pound. During January, Adler purchased 160,000 pounds of direct material at a cost of $304,000 and used 142,500 pounds in production of 18,700 units. Calculate the direct materials price variance and indicate whether the variance is favorable or unfavorable. Direct materials price variance $
Adler Industries uses a standard cost system in which direct material is carried at standard cost. Adler has established the following standards for one unit of product: standard quantity of 8 pounds, standard price $1.8 per pound. During January, Adler purchased 160,000 pounds of direct material at a cost of $304,000 and used 142,500 pounds in production of 18,700 units. Calculate the direct materials price variance and indicate whether the variance is favorable or unfavorable. Direct materials price variance $
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:Adler Industries uses a standard cost system in which direct material is carried at standard cost. Adler has established the following
standards for one unit of product: standard quantity of 8 pounds, standard price $1.8 per pound. During January, Adler purchased
160,000 pounds of direct material at a cost of $304,000 and used 142,500 pounds in production of 18,700 units.
Calculate the direct materials price variance and indicate whether the variance is favorable or unfavorable.
Direct materials price variance $
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