Peyton Approved Case Study

Budget variances have been recorded for Peyton Approved, which will show how well the company is running. To find variances a manager “will compare actual production costs to the standard costs” (Nobles et al., 2014). The determined variances for Peyton Approved are cost variances and efficiency variances. A cost variance “measures how well the business keeps unit costs of material and labor inputs within standards” (Nobles et al., 2014). To calculate cost variance, a manager would subtract actual cost per unit with standard cost per unit and then multiply by the actual quantity ((AC-SC) x AQ). For direct material variances, the cost variance manages to record the price variations among raw materials. In this case, Peyton Approved has no material price variance due to the budgeted price per unit of material and actual price per unit of material both being $7.75. This means that the variance is 0. It also shows that purchase division within this company has
This variance is calculated by subtracting the actual quantity of input used with the standard quantity of input allowed for the actual number of units produced times the standard cost per unit of the input ((AQ-SQ) x SC). This variance is favorable due to the budgeted quantities of material being 30,000 units and the actual quantity of materials used being 31,000. The favorable 7,750 efficiency variance shows how Peyton Approved was efficient when it came to the consumption of materials. This means that the manager of production had very good control over the consumption of material. The total material cost variance for Peyton Approved is favorable 7,750, which tells someone that the company was able to have efficient control of material costs and remain within standards. With good management of materials and opportunities available Peyton Approved looks to be heading in the right