Reference no: EM133168192

Question - 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 1,640 armchairs

Direct materials purchased 18,700 board feet

Direct materials issued into production 17,130 board feet

Standard cost per unit (22 board feet × $8) $176 per unit produced

Purchase price variance $2,950 unfavorable

Required -

1. Calculate the actual price paid per board foot purchased.

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

3. 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).)

4. The purchasing manager may have purchased higher-than-standard quality raw material inputs is the most likely explanation for the price and usage variances.