Question
Playwood Company produces wooden toys and has the following standards for one of its toys: Direct materials (3 strips of wood @ $5 per strip)
Playwood Company produces wooden toys and has the following standards for one of its toys:
Direct materials (3 strips of wood @ $5 per strip) $15
Direct labour (1.5 hours @ $8 per hour) $12
During the year, the company produced 1,250 units of this toy. Actual wood purchased and used was 3,800 strips at a total cost of $17,480. Actual direct labour hour was 1,900 hours at $7.50 per hour.
(i) Determine the material price variance and whether it is favourable or unfavourable.
(ii) Determine the material usage variance and whether it is favourable or unfavourable.
(iii) Determine the total materials variance and whether it is favourable or unfavourable.
(iv) What are the possible causes for the material price and usage variance?
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