EXERCISE 10-1 Material Variances
Harmon household Products, Inc., manufactures a number of consumer item for general house hold use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 4,000 chopping boards using 11,000 board feet on hardwood. The hardwood cost the company $18,700
The company's standards for one chopping board are 2.5 board feet of hardwood, at a cost of $1.80 per board foot.
Required:
1. 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?
2 Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.