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

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, 5,000 large and 8,000 small notebooks were produced. The production records for the month indicate the following actual production quantities:

Required:
a. Calculate the cloth covering price variance ( i) at purchase and ( ii) when the materials are actually used.
b. Discuss why the two price variances calculated in ( a ) differ. Which is superior (andwhy)?

Transcribed Image Text:

Large Small oth covering Ring holder Direct labor 3 feet S0.30foot 1@ $0.12 each 0.15 hour @ $6,00bour 2 feet $0.30foot 1 @S0.12 each 0.10 hour$6.00Whour Cl Large Small Cloth covering Ring holders Direct labor 16,000 feet 5,000 @ s0.12 each 800 hours @ $5.80hour 15,500 feet 8,000 $0.12 each 780 hours @ $6.10/hour