Woodzone's Exciting Band Saw Blades Production Process
How does Woodzone manufacture construction equipment?
Woodzone manufactures construction equipment and specializes in making band saws out of carbide.
What is the direct material quantity variance if Woodzone used 8 lbs per blade instead of the standard 7.8 lbs?
A) $232.5
Direct Material Quantity Variance for Woodzone's Band Saw Blades
The direct material quantity variance is the cost difference between the actual and standard amount of material used for production. In the case of Woodzone's order of 250 band saw blades, the total direct material quantity variance is $232.5.
The direct material quantity variance is a crucial metric in evaluating production efficiency and cost control. It measures the discrepancy between the actual quantity of material used and the standard quantity that should have been used.
When Woodzone used 8 lbs of carbide per band saw blade instead of the standard 7.8 lbs, it resulted in a variance of 0.2 lbs per blade. This variance led to a cost difference of $0.93 per blade.
By multiplying the individual blade variance by the total order quantity of 250 blades, we arrive at the total direct material quantity variance of $232.5. This means that Woodzone spent $232.5 more than expected due to using a higher quantity of carbide per blade.
Understanding and analyzing variances such as the direct material quantity variance are essential for businesses like Woodzone to improve operational efficiency and control costs. By identifying the reasons behind variances, companies can take corrective actions to enhance performance and profitability.