Rayan Ltd has provided the following information: Quantity (kg) Unit Rate (Rs.) Total (Rs.) Standard Material X 10 2 20 Material Y 20 3 60 Material Z 20 6 120 Total 50 200 Actual Material X 5 3 15 Material Y 10 6 60 Material Z 15 5 75 Total 30 150 You are required to compute the following and interpret the result: a) Material cost variance b) Material price variance c) Material usage variance Do not give answer in image
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.
Rayan Ltd has provided the following information:
Quantity (kg) Unit Rate (Rs.) Total (Rs.)
Standard
Material X 10 2 20
Material Y 20 3 60
Material Z 20 6 120
Total 50 200
Actual
Material X 5 3 15
Material Y 10 6 60
Material Z 15 5 75
Total 30 150
You are required to compute the following and interpret the result:
a) Material cost variance
b) Material price variance
c) Material usage variance
Do not give answer in image
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