Waris Khan

Parallel inventory valuation – an alternative approach (Part 5) As the other remaining production related standard cost variances are treated in a similar way as the previously analyzed lot size variance, they are analyzed together in this post. In order to get a price, quantity and substitution variance posted, the following modifications have been made to the standard production process for the item that has already been used in the prior post. Instead of consuming one raw material, two pieces of the raw material are consumed, which results in a quantity variance of $500. The standard cost price of the raw material has been increased from $500 to $515 prior to the start of the production order. This gave rise to a price variance of 2 pcs x ($515-$500) = $30 The route card was posted with a different route version, which had a different (more expensive) cost category price setup ($600 instead of $490). This change resulted in a substitution variance of $110.  Other c