eded to meet production 60,000 50,000 30,000 60,000 Desired units of ending raw materials inventory ? ? ? 24,000 Total units of raw materials needed Units of beginning raw materials inventory 16,000 ? ? ? Units of raw materials to be purchased ? ? ? ?
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.
Selected information from the direct materials budget of Perry Incorporated is provided here:
| First | Second | Third | Fourth | |
|---|---|---|---|---|
| Required production in units of finished goods | 15,000 | 12,500 | 7,500 | 15,000 |
| Units of raw materials needed per unit of finished goods | 4 | 4 | 4 | 4 |
| Units of raw materials needed to meet production | 60,000 | 50,000 | 30,000 | 60,000 |
| Desired units of ending raw materials inventory | ? | ? | ? | 24,000 |
| Total units of raw materials needed | ||||
| Units of beginning raw materials inventory | 16,000 | ? | ? | ? |
| Units of raw materials to be purchased | ? | ? | ? | ? |
| Unit cost of raw materials | $ 5 | $ 5 | $ 5 | $ 5 |
| Cost of raw materials to be purchased | ? | ? | ? | ? |
Perry, Incorporated desires to maintain the ending inventory of raw materials at 40 percent of the next quarter's raw material needs. What is the cost of raw materials to be purchased in the first quarter?
multiple choice
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$300,000
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$320,000
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$380,000
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$400,000
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