COST ACCOUNTING
STANDARD COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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materials price variance.
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difference between the materials price variance and materials quantity variance.
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product of the materials price variance and the materials quantity variance.
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sum of the materials price variance and the materials quantity variance.
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Detailed explanation-1: -Direct materials quantity variance is the difference between the actual amount of materials used in the production process and the amount a company expected to use. Total variance is equal to the price variance plus the quantity variance. Total variance shows the relationship between the actual cost and standard cost.
Detailed explanation-2: -The formula for this variance is:(standard price per unit of material × actual units of material consumed) – actual material cost.
Detailed explanation-3: -Direct Material Cost Variance = Standard cost of direct materials specified for actual output achieved-Actual cost of direct materials used. The standard cost of direct material is: Standard quantity of direct materials x Standard price per unit of direct materials.
Detailed explanation-4: -When a company makes a product and compares the actual materials cost to the standard materials cost, the result is the total direct materials cost variance. An unfavorable outcome means the actual costs related to materials were more than the expected (standard) costs.