Item5 Time Remaining 4 hours 16 minutes 9 seconds 04:16:09 eBook Hint Item 5 Ite

Question

Item5 Time Remaining 4 hours 16 minutes 9 seconds 04:16:09 eBook Hint Item 5 Item 5 Time Remaining 4 hours 16 minutes 9 seconds 04:16:09 Required information Required information [The following information applies to the questions displayed below.] Hart Company made 3,600 bookshelves using 32,000 board feet of wood costing $332,800. The company's direct materials standards for one bookshelf are 10 board feet of wood at $10.30 per board foot. (1) Compute the direct materials price and quantity variances incurred in manufacturing these bookshelves. AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price

Explanation / Answer

1.Direct material price variance = AQ * ( AP -SP)

here,

AQ i.e actual quanitity = 32,000 board feet.

AP i.e actual price = $332,800 for 32,000 board feet =>$332,800 / 32,000 board feet

=>$10.40 per board feet.

Standard price = $10.30 per board feet.

now,

Direct material price variance = 32,000 board feet * ($10.40 - $10.30)

=>$3,200 (Unfavorable)

SInce actual price is greater than standard price, we have an unfavorable variance.

now

Direct material quantity variance = Standard price * ( Actual quantity - standard quantity)

here,

standard price = $10.30 per board foot.

actual quantity = 32,000 board feet.

standard quanitity = 10 board feet * 3,600 book shelves

=>36,000 board feet.

now,

direct material quanitity variance = $10.30 *(32,000 - 36,000)

=>$10,30 (-4000)

=>$41,200....(favourable)

As the actual quantity used is less than standard quantity used we have a favorable variance.

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