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 1,500 armchairs Direct materials purchased 19,000 board feet Direct materials issued into production 17,200 board feet Standard cost per unit (12 board feet × $8) $96 per unit produced Purchase price variance $2,850 unfavorable   Required: Calculate the actual price paid per board foot purchased. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Calculate the standard quantity of materials allowed (in board feet) for the number of units produced. Calculate the direct materials usage variance. (Indicate the effect of each variance by selecting "F" for favorable, "U"

Principles of Accounting Volume 2
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ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter8: Standard Costs And Variances
Section: Chapter Questions
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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 1,500 armchairs
Direct materials purchased 19,000 board feet
Direct materials issued into production 17,200 board feet
Standard cost per unit (12 board feet × $8) $96 per unit produced
Purchase price variance $2,850 unfavorable
 


Required:

  1. Calculate the actual price paid per board foot purchased. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  2. Calculate the standard quantity of materials allowed (in board feet) for the number of units produced.
  3. 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).)
  4. The purchasing manager may have purchased higher-than-standard quality raw material inputs is the most likely explanation for the price and usage variances.

 

 

 

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