Company material purchases amounted to 5,000 pounds at a price of 7 per pound. Actual costs incurred in the production of 5,000 units were as follows

Total direct labor cost 100,000 @10 per hour

Cost of Material used 70,000

The standards for one units of company product are as follows

Direct LaborDirect Material

- 3 hours required for one unit - 2 pounds of Material required for one unit

- Rate 24 per hour - Price 20 per pound

Required:

a.Compute the following

• Material variance
• Material quantity variance
• Material price variance

b. Being an accounting expert, elaborate that how standard costing system facilitates managerial planning, reduction in production costs and decision making. Use your analytical thinking to answer the question