Fiberworks Company is a manufacturer of fiberglass toy boats. The company has recently implemented a standard cost system and has designed the system to isolate variances as soon as possible. During the month of May, the following results were reported for the production of 25,500 toy boats: Direct materials (fiberglass) purchased 49,900 pounds Direct materials issued into production 39,900 pounds Standard pounds allowed per boat 1.5 pounds Standard price per pound $6.52 Cost of fiberglass purchased $306,386 Required: Calculate the direct materials usage variance for May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Fiberworks Company is a manufacturer of fiberglass toy boats. The company has recently implemented a
| Direct materials (fiberglass) purchased | 49,900 | pounds |
| Direct materials issued into production | 39,900 | pounds |
| Standard pounds allowed per boat | 1.5 | pounds |
| Standard price per pound | $6.52 | |
| Cost of fiberglass purchased | $306,386 | |
Required:
- Calculate the direct materials usage variance for May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
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