The standards for product V28 call for 9.1 pounds of a raw material that costs $18.00 per pound. Last month, 3,100 pounds of the raw material were purchased for $55,180. The actual output of the month was 320 units of product V28. A total of 3,100 pounds of the raw material were used to produce this output. The direct materials purchases variance is computed when the materials are purchased. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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.
The standards for product V28 call for 9.1 pounds of a raw material that costs $18.00 per pound. Last month, 3,100 pounds of the raw material were purchased for $55,180. The actual output of the month was 320 units of product V28. A total of 3,100 pounds of the raw material were used to produce this output.
The direct materials purchases variance is computed when the materials are purchased.
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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