Esteban Products produces instructional aids, including white boards, which use colored markers instead of chalk. These are particularly popular for conference rooms in educational institutions and executive offices of large corporations. The standard cost of materials for this product is 10 pounds at $8.50 per pound. During the first month of the year, 3,600 boards were produced. Information concerning actual costs and usage of materials follows: Materials purchased 35,600 lbs. @ $8.60 Materials used 35,100 lbs. Required: 1. Compute the materials price and usage variances. 2. Prepare journal entries on Jan. 31 for all activity relating to materials.
Esteban Products produces instructional aids, including white boards, which use colored markers instead of chalk. These are particularly popular for conference rooms in educational institutions and executive offices of large corporations. The standard cost of materials for this product is 10 pounds at $8.50 per pound. During the first month of the year, 3,600 boards were produced. Information concerning actual costs and usage of materials follows: Materials purchased 35,600 lbs. @ $8.60 Materials used 35,100 lbs. Required: 1. Compute the materials price and usage variances. 2. Prepare journal entries on Jan. 31 for all activity relating to materials.
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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Esteban Products produces instructional aids, including white boards, which use colored markers instead of chalk. These are particularly popular for conference rooms in educational institutions and executive offices of large corporations. The standard cost of materials for this product is 10 pounds at $8.50 per pound.
During the first month of the year, 3,600 boards were produced. Information concerning actual costs and usage of materials follows:
| Materials purchased | 35,600 lbs. @ $8.60 |
| Materials used | 35,100 lbs. |
| Required: | |
| 1. | Compute the materials price and usage variances. |
| 2. | Prepare |
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