Oakwood, Inc., manufactures end tables, armchairs, and other wood furniture products from high-quality materials. The company...

Oakwood, Inc., manufactures end tables, armchairs, and other wood furniture products from high-quality materials. The company uses a standard costing system and isolates variances as soon as possible. The purchasing manager is responsible for controlling direct material price variances, and production managers are responsible for controlling usage variances. During November, the following results were reported for the production of American Oak armchairs:


Units produced	1,670	armchairs
Direct materials purchased	18,500	board feet
Direct materials issued into production	17,250	board feet
Standard cost per unit (22 board feet × $7.2)	$158.4	per unit produced
Purchase price variance	$2,620	unfavorable

Required:

a. Calculate the actual price paid per board foot purchased. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Calculate the standard quantity of materials allowed (in board feet) for the number of units produced.

c. Calculate the direct materials usage variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Expert Solution

a. Purchase price variance = (AP - SP) X AQ

2620 = (AP - 7.2) X 17250

AP = 7.35

b. Standard quantity of materials allowed = Units produced X SQ

= 1670 X 22

= 36,740 board feet

c. Direct material usage variance = (SQ - AQ) X SP

= (36740 - 17250) X 7.2

= $140,328 F

ekkarill92 answered 2 years ago

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