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:

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)?

  • CreatedDecember 15, 2014
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