The standard costs and actual costs for direct materials for the manufacture of 2,000 actual units of product are as follows: Standard Costs Direct materials 1,040 kilograms at $8.98 Actual Costs Direct materials 2,000 kilograms at $8.40 The direct materials price variance is a.$1,160 unfavorable b.$603 favorable c.$1,160 favorable d.$603 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.
The
| Standard Costs | |
| Direct materials | 1,040 kilograms at $8.98 |
Actual Costs |
|
| Direct materials | 2,000 kilograms at $8.40 |
The direct materials price variance is
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