BE11.1 (LO 1), AP Lopez Company uses both standards and budgets. For the year, estimated production of Product X is 500,000 units. Total estimated cost for materials and labor are $1,400,000 and $1,700,000, respectively. Compute the estimates for (a) a standard cost and (b) a budgeted cost. Set direct materials standard.
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.
Standard cost is the technique in accounting which is used to determine the standard or estimated the cost of components in per unit and the cost per unit of direct material is term as the standard.
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