Vinnie’s Meatball House makes delicious meatballs. They use a flexible budget system with the following standard costs: Quantity Price Direct Materials .3 per meatball 25 cents per meatball Anticipated Meatballs made 10,000 The actual costs are as follows: Quantity Price Direct Materials .5 per meatball 35 cents per meatball Total Meatballs made 10,000 Management would like you to compute: Direct Materials Price Variance Direct Materials Efficiency 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.
Vinnie’s Meatball House makes delicious meatballs.
They use a flexible budget system with the following
Quantity Price
Direct Materials .3 per meatball 25 cents per meatball
Anticipated Meatballs made 10,000
The actual costs are as follows:
Quantity Price
Direct Materials .5 per meatball 35 cents per meatball
Total Meatballs made 10,000
Management would like you to compute:
- Direct Materials Price Variance
- Direct Materials Efficiency Variance
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