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The following data relate to the direct materials cost for the production of 20,000 automobile tires:
Actual: 80,000 lbs. at $2.65 $212,000Standard: 86,000 lbs. at $2.50 $215,000
Problem a ) Determine the price variance, quantity variance, and total direct materials cost variance.
Problem b) To whom should the variances be reported for analysis and control?
Explain the concept of standard cost and its importance to decision makers. When is variance considered to be favorable or unfavorable?
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