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Howard binding manufactures two types of notebooks large and small. The large and small notebooks ar

Question: Howard binding manufactures two types of notebooks large and small. The large and small notebooks are made of the same cloth cover (direct materials) but in different quantities. The standard cost sheet for each follows.

Large small

Cloth covering 3 feet @ $0.30/ foot 2 feet @ $0.30/ foot

Ring holder 1 @ $0.12 each 1 @ $0.12 each

Direct labor 0.15 hr @ $6.00/ hr 0.10 hr @ $6.00/hr

At the beginning of the month the purchasing department bought 35,000 feet of cloth for $10,850. There were no beginning inventories. During the month 5000 large and 8000 small notebooks were produced. The production records for the month indicate the following actual production quantities:

Large small

Cloth covering 16,000 feet 15,500 feet

Ring holders 5000@ $0.12 ea 8000 @ $0.12 ea

Direct Labor 800 hrs @ $5.80/hr 780 hrs @ $6.10/hr

Required:

a. Calculate the cloth covering price variance (i) at purchase (ii) when the materials are actually used.

b. Discuss why the two prices variances calculated in (a) differ. Which is superior and why?

a. Calculate the cloth covering price variance (i) at purchase and (ii) when the materials are actually used.

Price: $2.99

Solution: The downloadable solution consists of 2 pages
Deliverables: Word Document