Answered: Riza Company uses a standard cost…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 8E: Standard cost summary; materials and labor cost variances Perkins Processors Inc. produces an...

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Riza Company uses a standard cost system. Information for raw materials for Product DEF for the month of August follows:

Standard price per pound of raw materials $1.60

Actual purchase price per pound of raw materials $1.55

Actual quantity of raw materials purchased 2,000 pounds

Actual quantity of raw materials used 1,900 pounds

Standard quantity allowed for actual production 1,800 pounds

Question: What is the materials purchase price variance? (label whether favorable or unfavorable; no dollar sign and comma)

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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