Exercise-1 (Computation of materials price and quantity variance)
Delta Woods Inc., manufactures wood products for the use in small and medium size offices. One of its products is a chair.
Last month Delta manufactured 4,000 chairs for which 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.
- Compute the standard cost of wood needed to manufacture 4,000 chairs.
- Compute direct materials price and quantity variance for the last month.
(1). Standard cost of wood:
Standard quantity allowed × Standard price
10,000* feet × $3.60
*4,000 chairs × 2.5 feet
(2). Computation of direct materials variances
a. Direct materials price variance:
F = Favorable
b. Direct materials quantity variance:
U = Unfavorable
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