Question

Paxon Co. has a price variance of $5,000 (F) and a quantity variance of $4,000 (U)...

Paxon Co. has a price variance of $5,000 (F) and a quantity variance of $4,000 (U) for raw materials. Given that the total actual cost for raw material is $40,000, what is the total standard cost?

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Homework Answers

Answer #1

Standard cost is $41,000

Explanation:

Material Cost variance is made up of :-

Material Cost variance = Material Price Variance (given) + Material quantity variance (given)

Material Cost variance = $5,000 (F) + $4,000 (U)

Material Cost variance = $1,000 (F)

Further more:-

formula of Material Cost variance

Material Cost variance = Standart material cost - actual material cost

$1,000 = Standart material cost - $40,000

Standart material cost = $ 40,000 + $1,000

Standart material cost = $ 41,000

Note:- Standard material cost > actual material cost where the outcomes are favourable

like in this question Material Cost variance = $1,000 (F) it is favourable, so standard material cost must be greater than actual material cost

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