Variance Chapter

Parmon Household Products Inc. manufactures a number of consumer products including a chopping board. The board requires an expensive hardwood. During a decent month Parmon manufactured #$4,000$ boards using #$11,000$ board feet of hardwood. The hardwood cost $$18,700.$

Parmon's standards for one chopping board are #$2\mathrm{.}5$ board feet of hardwood at a cost of $$1\mathrm{.}80$ per board foot.

REQUIRED: Prepare in EXCEL the answers to the following questions.

A$.$ According to the standards, what cost of wood should have been incurred to make #$4,000$ chopping boards.

B$.$ How much more or less is the standard cost compared to the actual cost?

C$.$ Break down the difference in $B$ above between the material price variance and the material quantity variance.

American Air Meals, Inc $($AAM$)$ prepares in flight meals for American Airlines. One product is stuffed chicken with roasted red peppers, corn and a spring salad. During the most recent week, AAM prepared #$6,000$ of these meals using #$1,150$ direct labor hours and paid the kitchen workers $$11,500$ or $$10\mathrm{.}00$ per hour.

According to the standard cost card for this meal, it should require $\mathrm{.}2$ direct labor hours at a cost of $$9\mathrm{.}50$ per hour.

A$.$ Prepare the calculation for the Labor Rate variance and the Labor efficiency variance