Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman

Exercise 3

Howard Binding manufactures two types of notebooks: large and small. The large and small notebooks 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 (and why)