Question 28 X operates a standard marginal costing system. The following budgeted and standard cost information is available: Budgeted production and sales 10,000 units Direct material cost – 3 kg x $10 $30 per unit Actual results for the period were as follows: Production and sales 11,500 units Direct material – 36,000 kg $342,000 The direct material price variance is A. $18,000 adverse B. $3,000 adverse C. $3,000 favourable D. $18,000 favourable
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.
Question 28
X operates a standard marginal costing system. The following budgeted and
information is available:
Budgeted production and sales 10,000 units
Direct material cost – 3 kg x $10 $30 per unit
Actual results for the period were as follows:
Production and sales 11,500 units
Direct material – 36,000 kg $342,000
The direct material price variance is
A. $18,000 adverse
B. $3,000 adverse
C. $3,000 favourable
D. $18,000 favourable
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