What is the cost price variance? National Co. produces and sells cellular phone blaster, a gadget which explodes when activatedwith a remote commander. This is used by cell phone owners when their unit is snatched from themor is taken by thieves. The static master budget and the adual results of operations for the monthof June are as follows:Budget8,000 unitsP800,000480,000P320.000Adual9,600 unitsSalesCost of goods soldGross profitP1,056,000556.800P 499,200Management wants an explantation ofthe favorable gross profit variance of P 179,200 (adual grossprofit of P499,200 less bud geted gross profit of P320,000).

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cost price variance is calculated as: (Actual unit cost - Standard unit cost) * Actual quantity…

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Business

Accounting

cost price variance

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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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Question

What is the cost price variance?

National Co. produces and sells cellular phone blaster, a gadget which explodes when activated
with a remote commander. This is used by cell phone owners when their unit is snatched from them
or is taken by thieves. The static master budget and the adual results of operations for the month
of June are as follows:
Budget
8,000 units
P800,000
480,000
P320.000
Adual
9,600 units
Sales
Cost of goods sold
Gross profit
P1,056,000
556.800
P 499,200
Management wants an explantation ofthe favorable gross profit variance of P 179,200 (adual gross
profit of P499,200 less bud geted gross profit of P320,000).

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