CPA Inc. uses standard costing for the single product it manufactures. During March, 35,000 units of raw materials were purchased for P105,000 and 12,000 units of finished goods were produced. Two units of raw materials are required to produce one unit of product. The standard materials allowed for production was P60,000. Unfavorable quantity variance is P2,500. Materials price variance for the units used in March was A. P2,500 F B. P2,500 U D. P15,000 U
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.
89. CPA Inc. uses standard costing for the single product it manufactures. During March, 35,000 units of raw materials were purchased for P105,000 and 12,000 units of finished goods were produced. Two units of raw materials are required to produce one unit of product. The standard materials allowed for production was P60,000. Unfavorable quantity variance is P2,500.
Materials price variance for the units used in March was
A. P2,500 F
B. P2,500 U
D. P15,000 U
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