Exercise 8-4 Material Variances [LO4] Harmon Household Products, Inc., manufactu

Question

Exercise 8-4 Material Variances [LO4]

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 3,300 chopping boards using 2,178 board feet of hardwood. The hardwood cost the company $16,553.

     The company

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 3,300 chopping boards using 2,178 board feet of hardwood. The hardwood cost the company $16,553.

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1a:

Total Standard Cost = 3300*.57*8 = 15048

Part 1b:

Spending Variance = Actual Cost Incurred - Standard Cost = 16553 - 15048 = 1505 (Unfavorable)

Part 2:

Direct Material Quantity Variance = Standard Rate*(Actual Quantity - Standard Quantity of Material Used for Actual Production) = 8*(2178 - 3300*.57) = 2376 (Unfavorable)

Direct Material Price Variance = Actual Quantity *(Actual Rate - Standard Rate) = 2178*(16553/2178 - 8) = 871 (Favorable)

Thanks.

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