TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Quantity Standard Price Standard Cost Direct Materials 8 pounds $ 3.10 per pound $ 24.80 Direct Labor 0.25 hour $ 10.60 per hour 2.65 $ 27.45 During November, TaskMaster purchased 166,500 pounds of direct materials at a total cost of $499,500. The total factory wages for November were $55,000, 90% of which were for direct labor. TaskMaster manufactured 19,600 units of product during November using 147,000 pounds of direct materials and 5,130 direct labor hours. "Is the direct materials price variance favorable or unfavorable?"
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.
TaskMaster Enterprises employs a
| Standard Quantity | Standard Price | Standard Cost | |||
|---|---|---|---|---|---|
| Direct Materials | 8 | pounds | $ 3.10 | per pound | $ 24.80 |
| Direct Labor | 0.25 | hour | $ 10.60 | per hour | 2.65 |
| $ 27.45 |
During November, TaskMaster purchased 166,500 pounds of direct materials at a total cost of $499,500. The total factory wages for November were $55,000, 90% of which were for direct labor. TaskMaster manufactured 19,600 units of product during November using 147,000 pounds of direct materials and 5,130 direct labor hours.
"Is the direct materials price variance favorable or unfavorable?"
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