Question 5: A Mechanical Design Company produces an innovative design of Batttery used for electric cars. The standard design of producing one(1) unit of Battery is provided in the bill of materials BOM which requires material mix shown in Table Q5a. The current monthly production of Battery is 2000 units per month with the actual material consumption shown in Table Q5b. Determine the following and justify why it is favorable or adverse. (6) Material usage variance; (i) Material price variance; (ii) Total material cost variance; Table Q5a Materials Usage (units) Total cost (OMR) V 17 W 3 38 50 38 Y 2 Table Q5b Total cost (OMR) 50,478 93,522 104,477 76.889 Materials Usage (units) 12,027 6,879 17,231 4,347 V Y
Question 5: A Mechanical Design Company produces an innovative design of Batttery used for electric cars. The standard design of producing one(1) unit of Battery is provided in the bill of materials BOM which requires material mix shown in Table Q5a. The current monthly production of Battery is 2000 units per month with the actual material consumption shown in Table Q5b. Determine the following and justify why it is favorable or adverse. (6) Material usage variance; (i) Material price variance; (ii) Total material cost variance; Table Q5a Materials Usage (units) Total cost (OMR) V 17 W 3 38 50 38 Y 2 Table Q5b Total cost (OMR) 50,478 93,522 104,477 76.889 Materials Usage (units) 12,027 6,879 17,231 4,347 V Y
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 14CE: Refer to Cornerstone Exercise 8.13. In March, Nashler Company produced 163,200 units and had the...
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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.
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Transcribed Image Text:Question 5:
A Mechanical Design Company produces an innovative design of Batttery used for electric cars. The standard design of producing one(1) unit of Battery is provided in the bill of materials
BOM which requires material mix shown in Table Q5a. The current monthly production of Battery is 2000 units per month with the actual material consumption shown in Table Q5b. Determine
the following and justify why it is favorable or adverse.
(i) Material usage variance;
(ii) Material price variance;
(ii) Total material cost variance;
Table Q5a
Usage (units)
Materials
Total cost (OMR)
V
17
W
3
38
8
50
Y
2
38
Table Q5b
Usage (units)
12,027
6,879
Materials
Total cost (OMR)
50,478
93,522
104,477
76,889
V
W
Y
4,347
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