information on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used 30,800 Actual costs of direct materials used $ 137,800 Standard price per unit of direct materials $ 4.28 Flexible budget for direct materials $ 121,300 Bowgie Chemicals has no materials inventories. Required: a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances. b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing.
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.
information on Bowgie Chemicals direct materials costs follows.
| Actual quantities of direct materials used | 30,800 | ||
| Actual costs of direct materials used | $ | 137,800 | |
| Standard price per unit of direct materials | $ | 4.28 | |
| Flexible budget for direct materials | $ | 121,300 | |
Bowgie Chemicals has no materials inventories.
Required:
a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances.
b. (Appendix) Prepare the
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