Woodson Wood Products, Inc., manufactures various items from wood. One of these

Question

Woodson Wood Products, Inc., manufactures various items from wood. One of these products is a chair. During a recent month, the company manufactured 1,700 chairs using 8,205 board feet of hardwood. The hardwood cost the company $32,000. The company's standards for one chair are 5 board feet of hardwood, at a cost of $3.85 per board foot. 1. Required What is the standard quantity of board feet of hardwood (SQ) that is allowed to make 1,700 chairs? What is the standard materials cost allowed (SQ x SP) to make 1,700 chairs? What is the materials spending variance? What is the materials price variance and the materials quantity variance? 1. 2. 3. 4.

Explanation / Answer

Question 1 Calculation Standard quantity for actual production:

Standard quantity for production of one chair = 5 board feet

Standard quantity for production of 1,700 units = 1,700 x 5 board feet = 8,500 board feet.

Question 2 Calculation Standard material cost

Standard material cost = Standard quantity x Standard price

= 8,500 board feet x $3.85 per board feet

= $32,725

Question 3 Calculation of material spending variance

Spending variance = actual cost - standard cost for actual production

= $32,000 - $32,725

= $725 (Favorable)

It is favorable because actual cost incurred is less than the cost estimated

Question 4 Calculation of Material price variance and Material Quantity variance:

Material Price Variance = Actual quantity purchased x (Standard price - Actual price)

= 8,205 board feet ($3.85 - $3.90)

= $410.25 (Unfavorable)

[Note: Actual price per board feet = $32,000 ÷ 8,205 board feet = $3.9 per board feet]

Material Quantity Varaince = Actual price x (Stnd. quanity for actual prod. - Actual quantitty)

= $3.90 x (8,500 - 8,205)

= $1,150.5 (Favorable)

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