Gibson Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.10 pounds $ 0.50 0.70 hours $ 8.70/hour $ 201,300 During Year 2, Gibson planned to produce 33.000 drip candles. Production lagged behind expectations, and it actually produced only 26.000 drip candles. At year-end, direct materials purchased and used amounted to 30,000 pounds at a unit price of $0.44 per pound. Direct labor costs were actually $8.20 per hour and 20,300 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $166,400. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor. f. Compute the fixed cost spending and volume variances.
Gibson Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.10 pounds $ 0.50 0.70 hours $ 8.70/hour $ 201,300 During Year 2, Gibson planned to produce 33.000 drip candles. Production lagged behind expectations, and it actually produced only 26.000 drip candles. At year-end, direct materials purchased and used amounted to 30,000 pounds at a unit price of $0.44 per pound. Direct labor costs were actually $8.20 per hour and 20,300 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $166,400. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor. f. Compute the fixed cost spending and volume variances.
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:**Gibson Company - Drip Candles Manufacturing Standards and Costs Analysis**
Gibson Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles:
- **Direct Materials:**
- Amount per candle: 1.2 pounds
- Price per pound: $1.80
- **Direct Labor:**
- Hours per unit: 0.7 hours
- Price per hour: $3.78
- **Overhead:**
- Total budgeted fixed overhead: $201,280
**Year 2 Production Overview:**
During Year 2, Gibson planned to produce 30,000 drip candles. However, production lagged and only 26,000 drip candles were produced. At year-end:
- Direct materials purchased: 30,000 pounds
- Unit price: $0.44 per pound
- Direct labor costs: $8.20 per hour
- Actual hours worked: 20,300 hours
- Overhead cost for the year: $166,400, applied using a predetermined rate based on estimated units.
**Requirements:**
a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead, and the total standard cost for one drip candle.
c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead, and the total actual cost per candle.
e. Compute the price and usage variances for direct materials and direct labor.
f. Compute the fixed cost spending and volume variances.
**Cost Calculation Table:**
| Cost | Standard Cost per Unit |
|----------------|------------------------|
| Direct Material| |
| Direct Labor | |
| Overhead | |
| Total per candle| |
*Instructions are to round answers to 2 decimal places.*
For detailed computation, students should enter their answers in the tabs provided, corresponding to the requirements listed.
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