Exercise 10-2 Material Variances [LO2]
Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 4,000 chopping boards using 11,000 board feet of hardwood. The hardwood cost the company $18,700.
The company's standards for one chopping board are 2.5 board feet of hardwood, at a cost of $1.80 per board foot.
(a) What cost for wood should have been incurred to make 4,000 chopping blocks? (Omit the "$" sign in your response.)
Cost incurred $
(b) How much greater or less is this than the cost that was incurred? (Omit the "$" sign in your response.)
Cost incurred is by $ than the actual cost incurred.
Break down the difference computed in requirement 1 above into a materials price variance and a materials quantity variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)
Materials price variance $
Materials quantity variance $
The solution explains how to calculate material variances