Kennedy Inc. has the following data for its operation in August: Increase in direct materials inventory 100 Sets Direct materials purchased (AQ) 1,600 Sets Finished goods manufactured 700 units Direct materials purchase-price variance $ 688 Favorable Budgeted Finished goods to manufacture 800 Units Direct materials purchases 2,000 Sets Direct materials per unit of finished goods 2 Sets Direct materials price per set (SP) $ 5.40 What was the direct materials usage variance in August, rounded to the nearest dollar? Multiple Choice $810 unfavorable. $1,080 unfavorable. $270 unfavorable. $810 favorable. $540 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.
Kennedy Inc. has the following data for its operation in August:
Increase in direct materials inventory | 100 | Sets | ||
Direct materials purchased (AQ) | 1,600 | Sets | ||
Finished goods manufactured | 700 | units | ||
Direct materials purchase-price variance | $ | 688 | Favorable | |
Budgeted | ||||
Finished goods to manufacture | 800 | Units | ||
Direct materials purchases | 2,000 | Sets | ||
Direct materials per unit of finished goods | 2 | Sets | ||
Direct materials price per set (SP) | $ | 5.40 | ||
What was the direct materials usage variance in August, rounded to the nearest dollar?
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