Longman Inc is a manufacturer of crystal glasses. The standard direct materials quantity is 0.8 pound per glass at a cost of $0.60 per pound. The actual result for one months’s production of 6,800 glasses was 1.1 pounds per glass, at a cost of $0.40 per pound. Calculate the direct materials cost variance and the direct materials efficiency variance. Select the formula then enter the amounts and compute the cost variance for direct materials and identify whether the variance is favorable (F) or unfavorable (U)
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.
Longman Inc is a manufacturer of crystal glasses. The standard direct materials quantity is 0.8 pound per glass at a cost of $0.60 per pound. The actual result for one months’s production of 6,800 glasses was 1.1 pounds per glass, at a cost of $0.40 per pound. Calculate the direct materials cost variance and the direct materials efficiency variance.
Select the formula then enter the amounts and compute the cost variance for direct materials and identify whether the variance is favorable (F) or unfavorable (U)
Direct Materials Cost Variance = Actual Direct Materials Cost - Standard Direct Materials Cost
Direct Material efficiency variance = (Actual quantity used - Standard quantity allowed)*Standard rate per pound
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