The company produces a single product and has prepared the following standard cost sheet for one unit of the product. • DM 8 pounds at $2.50 per pound During the month, the company manufactures 240 units and incurs the following actual costs. • Direct material purchase and used 1,900 pounds at a cost of $2.65 per pound A. Calculate the Direct Material price variance B. Calculate the Direct Material quantity variance C. Calculate the Total Direct Material cost variance
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.
The company produces a single product and has prepared the following
unit of the product.
• DM 8 pounds at $2.50 per pound
During the month, the company manufactures 240 units and incurs the following actual costs.
• Direct material purchase and used 1,900 pounds at a cost of $2.65 per pound
A. Calculate the Direct Material price variance
B. Calculate the Direct Material quantity variance
C. Calculate the Total Direct Material cost variance
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