Starts Inc. produces a product for which the standard specifies 4 yards of material per unit. The standard price of one yard of material is $22.60. During the month, 7,700 products were manufactured, using 32,000 yards at a cost of $21.50. perform the journal entries to record the variances.
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.
Starts Inc. produces a product for which the standard specifies 4 yards of material per unit. The standard price of one yard of material is $22.60. During the month, 7,700 products were manufactured, using 32,000 yards at a cost of $21.50.
perform the
Variance: It refers to the difference between the standard or budgeted and actual results. The actual revenues and expenses may be greater, equal, or less than the budgeted figures.
Calculation of the variances as follows:
Result of the above:
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