Asked by Carlos Iturralde on May 25, 2024
Verified
Ruby Company produces a chair that requires 5 yards of material per unit. The standard price of one yard of material is $7.60. During the month, 8,500 chairs were manufactured, using 40,000 yards at a cost of $7.50.?Determine the
(a) price variance,
(b) quantity variance, and
(c) total cost variance.
Quantity Variance
The difference between the expected and actual quantities used or produced in a process.
Price Variance
A measurement of the difference between the actual cost of a good or service and its expected cost.
Total Cost Variance
The difference between the actual cost and the standard cost of an operation, process, or product.
- Absorb the methods used for calculating variances in direct materials, direct labor, and plant overhead costs.
- Identify and explain the different types of variances, including price, quantity, rate, time, and volume variances.
- Convey an understanding of standard costs and variances as tools for management's decision-making.
Verified Answer
LR
Luciana ReichelMay 25, 2024
Final Answer :
(a) Price Variance = ($7.50 - $7.60) × 40,000 = $ (4,000) Favorable?
(b) Quantity Variance = [ (8,500 × 5) - 40,000] × $7.60 = $ (19,000) Favorable?
(c) Total Cost Variance = $ (23,000) Favorable
(b) Quantity Variance = [ (8,500 × 5) - 40,000] × $7.60 = $ (19,000) Favorable?
(c) Total Cost Variance = $ (23,000) Favorable
Learning Objectives
- Absorb the methods used for calculating variances in direct materials, direct labor, and plant overhead costs.
- Identify and explain the different types of variances, including price, quantity, rate, time, and volume variances.
- Convey an understanding of standard costs and variances as tools for management's decision-making.