material variances.
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.
A manufacturing company uses the following standard mix of their compound in one batch of 100 kgs. of its production line :
50 kgs of material X at the standard price of Rs. 2.
30 kgs of material Y at the standard price of Rs. 3.
20 kgs of material Z at the standard price of Rs. 4.
The actual mix for a batch of 100 kgs was as follows:
60 kgs of material X at the price of Rs. 3.
40 kgs of material Y at the price of Rs. 2.5.
10 kgs of material Z at the price of Rs. 3.
Calculate the different material variances.
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