Cory purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Cory's accounting records at the end of the period disclosed a material price variance of P5,000U and a material quantity variance of P3,000F, determine the actual price paid for a gallon of direct material.
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.
Cory purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Cory's accounting records at the end of the period disclosed a material price variance of P5,000U and a material quantity variance of P3,000F, determine the actual price paid for a gallon of direct material.
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