Griffen Company makes pipe using metal. The company uses a standard costing system. Variable overhead is allocated on the basis of direct material usage (pounds). Overhead is allocated to units based on expected production of 13,100 units. Griffen maintains a materials inventory, so the amount of material used is not necessarily the same as the amount of material purchased in any one month The standard cost sheet for a unit of pipe follows. Direct material Direct labor Variable overhead Fixed overhead 6 pounds 2 hours $ 5 $ 30.00 @$25 50.00 6 pounds @$ 2 12.00 20.00 $112.00 August financial results show that the average purchase price of metal was $5.30 per pound. The purchase price variance $34,800 unfavorable. The variable overhead efficiency variance was 9,100 unfavorable. Good output produced totaled 16,100 units. Required: a. How many pounds of metal were purchased in August? (Do not round intermediate calculations.) b. What was the direct material efficiency variance in August? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) c. How many pounds of metal were used in August? (Do not round intermediate calculations.)
Griffen Company makes pipe using metal. The company uses a standard costing system. Variable overhead is allocated on the basis of direct material usage (pounds). Overhead is allocated to units based on expected production of 13,100 units. Griffen maintains a materials inventory, so the amount of material used is not necessarily the same as the amount of material purchased in any one month The standard cost sheet for a unit of pipe follows. Direct material Direct labor Variable overhead Fixed overhead 6 pounds 2 hours $ 5 $ 30.00 @$25 50.00 6 pounds @$ 2 12.00 20.00 $112.00 August financial results show that the average purchase price of metal was $5.30 per pound. The purchase price variance $34,800 unfavorable. The variable overhead efficiency variance was 9,100 unfavorable. Good output produced totaled 16,100 units. Required: a. How many pounds of metal were purchased in August? (Do not round intermediate calculations.) b. What was the direct material efficiency variance in August? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) c. How many pounds of metal were used in August? (Do not round intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Griffen Company makes pipe using metal. The company uses a standard costing system. Variable overhead is allocated on the basis
of direct material usage (pounds). Overhead is allocated to units based on expected production of 13,100 units. Griffen maintains a
materials inventory, so the amount of material used is not necessarily the same as the amount of material purchased in any one month.
The standard cost sheet for a unit of pipe follows.
Direct material
Direct labor
Variable overhead
Fixed overhead
6 pounds @$ 5
2 hours @ $25
$ 30.00
6 pounds @ $ 2
50.00
12.00
20.00
$112.00
August financial results show that the average purchase price of metal was $5.30 per pound. The purchase price variance $34,800
unfavorable. The variable overhead efficiency variance was 9,100 unfavorable. Good output produced totaled 16,100 units.
Required:
a. How many pounds of metal were purchased in August? (Do not round intermediate calculations.)
b. What was the direct material efficiency variance in August? (Do not round intermediate calculations. Indicate the effect of each
variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
c. How many pounds of metal were used in August? (Do not round intermediate calculations.)
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