The standard cost of Product B includes 3 units of Direct Material at $5.00 per unit. During January, 29,000 units of direct material are purchased and used. The units of Direct material cost $4.75 per unit. The company produced 9,300 units. 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 standard cost of Product B includes 3 units of Direct Material at $5.00 per unit. During January,
29,000 units of direct material are purchased and used. The units of Direct material cost $4.75 per
unit. The company produced 9,300 units.
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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