I’ve been studying variance analysis and believe that I understand correctly that for a process that generates WIP, that processing costs are absorbed into WIP inventory. And that the r/m portion of the WIP inventory is carried at standard usage until financial reporting is done. And that the r/m inventory is reduced by the actual raw materials used. But once the financial reports are run, that the r/m usage variance is added to the standard usage and the WIP inventory is adjusted accordingly. My question is how does this variance analysis work for a process that that takes raw materials and produces other raw materials for use in down-stream processes that actually generate WIP?
