Problem:
Your company uses a standard costing system.
At the beginning of the month, you budget to produce and sell 100 items.
Actual units produced are 120.
Standards for direct material are 4 lbs per unit at a standard price of $3 per pound.
Actual material purchased and used was 450 lbs.
Actual price paid was $2.90 lb.
All units produced were sold.
Consider direct material cost and calculate the following:
Static budget Variance
Flexible budget variance
sales volume variance
efficiency variance
price variance
Label each variance with its name and favorable or not.