The following materials standards have been established for a particular product: Standard quantity per unit of output 5.1 meters Standard price $ 17.90 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,700 meters Actual cost of materials purchased $ 142,450 Actual materials used in production 7,300 meters Actual output 1,400 units What is the materials price variance for the month?
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 following materials standards have been established for a particular product:
| Standard quantity per unit of output | 5.1 | meters | |
| Standard price | $ | 17.90 | per meter |
The following data pertain to operations concerning the product for the last month:
| Actual materials purchased | 7,700 | meters | |
| Actual cost of materials purchased | $ | 142,450 | |
| Actual materials used in production | 7,300 | meters | |
| Actual output | 1,400 | units | |
What is the materials price variance for the month?
Material price variance = (Actual price per pound - Standard price per pound)*Actual quantity purchased
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