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 4,000 chopping boards using 11,000 board feet of 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.
- 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?
- Break down the difference computed in (1) above into a materials quantity variance and a materials price variance.