Question

Required information

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Production= 3,260 bookshelves using 22,260 board feet of wood costing $298,284.

The company's direct materials standards for one bookshelf are 8 board feet of wood at $13.30 per board foot.

First, we need to calculate the direct material price and quantity variance, using the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

actual price= 298,284/22,260= $13.4

Direct material price variance= (13.3 - 13.4)*22,260

Direct material price variance= $2,226 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

standard quantity= 8*3,260= 26,080

Direct material quantity variance= (26,080 - 22,260)*13.3

Direct material quantity variance= $50,806 favorable

Finally, we need to calculate which of the variations should be looked at:

Price= (13.4/13.3)-1]*100= 0.75% is between the standards

Quantity= (22,260/26,080)-1]*100= 14.65% It should be studied further.