Managerial Acttg Question?

Question

McLuvin manufactures a chopping board, which requires an expensive hardwood. During a recent month, the company manufactured 3,300 chopping boards using 9,438 board feet of hardwood. The hardwood cost the company $19,819.8

The company's standards for one chopping board are 2.6 board feet of hardwood, at a cost of $2.2 per board foot.

Q1:

What cost for wood should have been incurred to make 3,300 chopping blocks?

Q2:

How much greater or less is this than the cost that was incurred? (In other words, cost incurred is less/greater by $___ than actual cost incurred.

Q3:

Break down the difference computed above into a materials price variance and a materials quantity variance.

Any tips/advice is much appreciated.

Answer 1

Q1:  $18,876.

Std cost = 2.6 bf/cb x $2.2 /bf = $5.72/cb.

$5.72 /cb x 3300 cb's = $18,876.

Q2: Actual cost incurred of $19,819.80 versus Standard Cost of $18,876 = $943.80 Unfavorable Variance.

Q3.

Matl Price var = $943.80 Favorable:

      Std:  $2.20/bf

    - Act:  $2.10/bf ($19,819.80 / 9,438 bf)

     = $.10/bf favorable x 9,438 bf used = $943.80 Favorable Price Variance.

Matl Qty Var = $1,887.60 Unfavorable:

Act qty used     = 9,438 bf

-Std qty allowed = 8,580 bf (3,300 cb's x 2.6 bf/cb)

= 858 bf unfav x $2.20 std price = $1,887.60 Unfav Quantity Variance.