What is the material price 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.
Talon Company
In June, Talon Company made 4,500 units of its product. Talon uses a
|
Standard: |
|
|
DLH per unit |
2.50 |
|
Variable overhead per DLH |
$1.75 |
|
Fixed overhead per DLH |
$3.10 |
|
Budgeted variable overhead |
$21,875 |
|
Budgeted fixed overhead |
$38,750 |
|
|
|
|
Actual: |
|
|
Direct labor hours |
10,000 |
|
Variable overhead |
$26,250 |
|
Fixed overhead |
$38,000 |
Refer to Talon Company. Using the four-variance approach, what is the variable overhead spending variance?
Rapid Manufacturing Company uses a standard cost system. In March the company produced 2,100 units of product TY768.
They have the following is information available:
| Standard: | |
| Material | 2 pounds per unit @ $5.80 per pound |
| Labor | 3 direct labor hours per unit @ $10.00 per hour |
| Actual: | |
| Material | 4,250 pounds purchased and used @ $5.65 per pound |
| Labor | 6,300 direct labor hours at $9.75 per hour |
What is the material price variance?
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