Harmon Household Products, Inc., manufactures a number of consumer items for gen

Question

Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 4,000 chopping boards using 2,760 board feet of hardwood. The hardwood cost the company $23,736.

     The company’s standards for one chopping board are 0.62 board feet of hardwood, at a cost of $9.00 per board foot.

According to the standards, what cost for wood should have been incurred to make 4,000 chopping blocks?

How much greater or less is this than the cost that was incurred? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance)

Break down the difference computed in (1) above into a materials quantity variance and a materials price variance.(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance)

Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 4,000 chopping boards using 2,760 board feet of hardwood. The hardwood cost the company $23,736.

Explanation / Answer

1a)

Standard cost for making 4000 boards,

Actual units * standard weight * standard rate = 4000*0.62 * 9 = $22,300.

1b)

Spending variance = Standard cost - Actual cost = 22,300-23,736

= 1,436 Unfavorable.

2)

Standard Qunatity = 4000*0.62 = 2480 boards

Actual rate = 23736/2760 = $8.6.

Matrial quantity variance = (Standard Quantity - Actual Quantity) * Standard rate

= (2480-2760)*9 =$2520 Unfavorable.

Material price variance = (Standard price -Actual price)*Actual quantity

= (9-$8.6) * 2760 = $1104 Favorable

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