A company reports the following for one of its products. Direct materials standard (5 pounds @ $2 per pound) Actual units produced Actual cost of direct materials used Compute the total direct materials variance and identify it as favorable or unfavorable. Note: Indicate the effect of the variance by selecting favorable, unfavorable, or no variance. Direct materials variance $10 per unit 30,000 units $ 321,000 Unfavorable
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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