Edgar, Inc. has a materials price standard of $1.54 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 8,000 pounds, although the standard quantity allowed for the output was 5,400 pounds. Calculate the materials quantity variance.
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.
Edgar, Inc. has a materials price standard of $1.54 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 8,000 pounds, although the standard quantity allowed for the output was 5,400 pounds.
Calculate the materials quantity variance.
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