Delta Woods Inc., manufactures wood products that are used in small and medium size offices. One of the products is a chair.

Last month Delta manufactured 4,000 chairs. The company purchased and used 11,000 feet of wood. The total cost of 11,000 feet of wood was $37,400.

According to direct materials price and quantity standards, one chair requires 2.5 feet of wood at a cost of $3.60.


  1. Compute the standard cost of wood required to manufacture 4,000 chairs. Also compute the difference between actual cost incurred and standard cost.
  2. Compute materials price and quantity variance.


(1). Standard  cost of wood:

10,000* feet × $3.60

= $36,000

*4,000 chairs × 2.5 feet

According to standards, the wood costing $36,000 should have been used to manufacture 4,000 chairs. But company used wood costing $37,400 to manufacture 4,000 chairs. There is a difference of $1,400 (unfavorable materials cost variance). Following is the break up of this difference:

(2).  Computation of material variances:

Actual quantity of materials purchased at actual price $37,400
Actual quantity of materials purchased at standard price $39,600*
Materials price variance $2,200 F
Actual quantity of materials used at standard price $39,600
Standard quantity of materials allowed at standard price $36,000
Materials quantity variance $3,600 U
F = Favorable
U = Unfavorable

*11,000 feet × $3.60 = $39,600

Net materials cost variance = $3,600 U – $2,200F = $1,400 U