It is estimated that a product requires 50 units of material at the rate of $3 per unit. The actual consumption of material for manufacturing the same product came to 60 units at the rate of $2.9 per unit. Calculate 1. Material cost variance 2. Material price variance 3. Material usage 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.
It is estimated that a product requires 50 units of material at the rate of $3 per unit. The actual consumption of material for manufacturing the same product came to 60 units at the rate of $2.9 per unit.
Calculate
1. Material cost variance
2. Material price variance
3. Material usage variance
Step by step
Solved in 2 steps with 1 images
