Reference no: EM13877179

Joint Direct Materials Variance Benderboard produces corrugated board containers that the nearby wine industry uses to package wine in bulk. Benderboard buys kraft paper by the ton, con- verts it to heavy-duty paperboard on its corrugator, and then cuts and glues it into folding boxes. The boxes are opened and filled with a plastic liner and then with the wine.

Many other corrugated board converters are in the area and competition is strong. Benderboard is eager to keep its costs under control. The company has used a standard cost system for several years. Responsibility for variances has been established. For example, the purchasing agent was responsible for the direct materials price variance, and the general supervisor answered for the direct materials usage variance.
Recently, the industrial engineer and the company's management accountant participated in a workshop sponsored by the Institute of Management Accountants at which there was some discus- sion of variance analysis. They noted that the workshop proposed that the responsibility for some variances was properly dual. The accountant and engineer reviewed their system and were not sure how to adapt the new information to it.

Benderboard has the following standards for its direct materials:

Standard direct materials cost per gross of finished boxes = 4½ tons of kraft paper at $10 per ton = $45.00

During May, the accountant assembled the following data about direct materials:

Finished product: 5,000 gross of boxes

Actual cost of direct materials used during month: $300,000 for 25,000 tons Direct materials put into production (used): 25,000 tons

Benderboard began and finished the month of May with no inventory

Required: Determine the following for Benderboard:

1. Direct materials price variance, calculated at point of production.

2. Direct materials efficiency (usage) variance.

3. Direct materials joint price-quantity variance (defined as: (AP-SP) x (AQ-SQ)).