Seven, Co. makes a single product and only one type of direct material is used to make this product. The firm uses a standard costing system and has provided the following data for May: Actual number of units of output produced 35,000 units Actual total materials cost $217,800 Actual price per ounce purchased/used $2.75 per ounce Materials price variance $11,880U Materials cost variance $5,900U Assume there were no beginning or ending inventories of direct materials. The standard quantity (SQ) is: a. 76,930 ounces b. 81,500 ounces c. 79,200 ounces d. 73,070 ounces
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.
Seven, Co. makes a single product and only one type of direct material is used to make this product. The firm uses a
|
Actual number of units of output produced |
35,000 units |
|
Actual total materials cost |
$217,800 |
|
Actual price per ounce purchased/used |
$2.75 per ounce |
|
Materials price variance |
$11,880U |
|
Materials cost variance |
$5,900U |
Assume there were no beginning or ending inventories of direct materials. The standard quantity (SQ) is:
| a. |
76,930 ounces |
|
| b. |
81,500 ounces |
|
| c. |
79,200 ounces |
|
| d. |
73,070 ounces |
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