Silicone Engine Inc. produces wrist-worn tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 580 tablets during December. However, due to LCD defects, the company actually used 600 LCD displays during December. Each display has a standard cost of $15.00. Six hundred LCD displays were purchased for December production at a cost of $8,550. Determine the price variance, quantity variance, and total direct materials cost variance for December.
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.
Silicone Engine Inc. produces wrist-worn tablet computers. The company uses Thin Film Crystal
(TFC) LCD displays for its products. Each tablet uses one display. The company produced 580
tablets during December. However, due to LCD defects, the company actually used 600 LCD
displays during December. Each display has a standard cost of $15.00. Six hundred LCD displays
were purchased for December production at a cost of $8,550.
Determine the price variance, quantity variance, and total direct materials cost variance for
December.
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