ECONOMICS

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COST ACCOUNTING

STANDARD COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A company developed the following standards for its product:2 kg of direct materials at RM4 per kg. Last month, 1, 500 kg of direct materials were purchased for RM5, 700 and the actual unit produce was 800. The direct materials price variance for last month was
A
RM700 favorable.
B
RM300 favorable.
C
RM400 favorable.
D
RM300 unfavorable.
Explanation: 

Detailed explanation-1: -In Procurement, Purchase Price Variance (PPV) is the difference between the standard price of a purchased material and its actual price. In Short, Purchase Price Variance = (Actual price – Standard price) x Quantity purchased.

Detailed explanation-2: -Material Price Variance= (Standard Price-Actual Price) × Actual Quantity.

Detailed explanation-3: -Under the Standard Costing System, which of the following actions is true about the cost variance? Explanation: The real cost of material cost, direct labor, and administration to produce a unit of product is known as actual cost. Variance is the difference between the actual and standard costs.

Detailed explanation-4: -Below are some of the Variance Analysis formulae that one can apply: Material Cost Variance Formula = Standard Cost – Actual Cost = (SQ * SP) – (AQ * AP) Labor Variance Formula= Standard Wages – Actual Wages = (SH * SP) – (AH * AP)

There is 1 question to complete.
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