Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows: Actual costs 1,540 lbs. @ $9.15 Standard costs 1,600 lbs. @ $9.00 Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance. For each variance, indicate if the variance is favorable or unfavorable. (a) (b) (c)
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.
Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:
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Actual costs |
1,540 lbs. @ $9.15 |
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1,600 lbs. @ $9.00 |
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance. For each variance, indicate if the variance is favorable or unfavorable.
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(a)
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(b)
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(c)
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