At Elkhardt, the standard price for the M640 electrical relay (a component used in the production of a commercial refrigeration unit) is $52. Standards call for 3.0 relays per unit of finished product. In July, the company purchased 145 relays for $8,700. The company used 108 relays in the production of 53 refrigeration units (4 relays were damaged in the installation process). Calculate the material price variance and the material quantity variance related to the M640 electrical relay. Indicate whether the variances are favorable or unfavorable. (Round intermediate calculations to 2 decimal places, e.g. 14.37 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.) Material Price Variance $enter a dollar amount unfavorable, favorable, or neither Material Quantity Variance $enter a dollar amount unfavaorable, favorabloe, or neither
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.
At Elkhardt, the standard price for the M640 electrical relay (a component used in the production of a commercial refrigeration unit) is $52. Standards call for 3.0 relays per unit of finished product. In July, the company purchased 145 relays for $8,700. The company used 108 relays in the production of 53 refrigeration units (4 relays were damaged in the installation process).
Calculate the material price variance and the material quantity variance related to the M640 electrical relay. Indicate whether the variances are favorable or unfavorable. (Round intermediate calculations to 2 decimal places, e.g. 14.37 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)
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Material Price Variance
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$enter a dollar amount | unfavorable, favorable, or neither | |||
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Material Quantity Variance
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$enter a dollar amount | unfavaorable, favorabloe, or neither | select an option |
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