Oakwood Inc. manufactures end tables, armchairs, and other wood furniture products from high-quality materials. The company uses a standard costing system and isolates variances as soon as possible. The purchasing manager is responsible for controlling direct material price variances, and production managers are responsible for controlling usage variances. During November, the following results were reported for the production of American Oak armchairs: Units produced Direct materials purchased Direct materials issued into production Standard cost per unit (12 board feet x $8.4) Purchase price variance 1,540 armchairs 18,400 board feet 17,370 board feet $100.8 per unit produced $2,620 unfavorable Required: a. Calculate the actual price paid per board foot purchased. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Calculate the standard quantity of materials allowed (in board feet) for the number of units produced. c. Calculate the direct materials usage variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Oakwood Inc. manufactures end tables, armchairs, and other wood furniture products from high-quality materials. The company uses a standard costing system and isolates variances as soon as possible. The purchasing manager is responsible for controlling direct material price variances, and production managers are responsible for controlling usage variances. During November, the following results were reported for the production of American Oak armchairs: Units produced Direct materials purchased Direct materials issued into production Standard cost per unit (12 board feet x $8.4) Purchase price variance 1,540 armchairs 18,400 board feet 17,370 board feet $100.8 per unit produced $2,620 unfavorable Required: a. Calculate the actual price paid per board foot purchased. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Calculate the standard quantity of materials allowed (in board feet) for the number of units produced. c. Calculate the direct materials usage variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Chapter8: Standard Costs And Variances
Section: Chapter Questions
Problem 5EA: Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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