Answered: Riza Company uses a standard cost…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Riza Company uses a standard cost system. Information for raw materials for Product DEF for the month of August follows:

Standard price per pound of raw materials $1.60

Actual purchase price per pound of raw materials $1.55

Actual quantity of raw materials purchased 2,000 pounds

Actual quantity of raw materials used 1,900 pounds

Standard quantity allowed for actual production 1,800 pounds

Question: What is the materials purchase price variance? (label whether favorable or unfavorable; no dollar sign and comma)

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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