Georgia, Inc. has collected the following data on one of its products. The actual cost of direct materials used is: Direct materials standard (2 lbs @ $3/lb) $6 per finished unit Total direct materials cost variance—unfavorable $17,750 Actual direct materials used 60,000 lbs. Actual finished units produced 20,000 units $102,250. $60,000. $137,750. $120,000. $153,250.
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.
Georgia, Inc. has collected the following data on one of its products. The actual cost of direct materials used is:
| Direct materials standard (2 lbs @ $3/lb) | $6 | per finished unit |
| Total direct materials cost variance—unfavorable | $17,750 | |
| Actual direct materials used | 60,000 | lbs. |
| Actual finished units produced | 20,000 | units |
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$102,250.
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$60,000.
-
$137,750.
-
$120,000.
-
$153,250.
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