ITS Corporation produced 350 units of product ABCD. To produce this, the company used 1,800 kilograms of plastic which they bought at $12 per kilogram. On the other hand, the standard price per kilogram of plastic is set at $12.50. The production resulted to an unfavorable total direct material spending variance of $850. Using limited data, determine the following: Direct material quantity variance = Total standard kilograms allowed to produce the 350 units of product ABCD. = For requirement 1, Indicate whether the variance is favorable or unfavorable.
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.
ITS Corporation produced 350 units of product ABCD. To produce this, the company used 1,800 kilograms of plastic which they bought at $12 per kilogram. On the other hand, the standard price per kilogram of plastic is set at $12.50.
The production resulted to an unfavorable total direct material spending variance of $850.
Using limited data, determine the following:
Direct material quantity variance =
Total standard kilograms allowed to produce the 350 units of product ABCD. =
For requirement 1, Indicate whether the variance is favorable or unfavorable.
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