Griffen Company makes pipe using metal. The company uses a standard costing syst

Question

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 13,200 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 7 pounds S 42.00 3 hours $26 78.00 7 pounds@s 3 21.00 21.00 $162.00 August financial results show that the average purchase price of metal was $6.30 per pound. The purchase price variance $35,100 unfavorable. The variable overhead efficiency variance was 9,200 unfavorable. Good output produced totaled 16,200 units Required a. How many pounds of metal were purchased in August? (Do not round intermediate calculations.) 117,000 pounds 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.) S 18.402 c. How many pounds of metal were used in August? (Do not round intermediate calculations.) 110,333 pounds

Explanation / Answer

1

Material Price Variance =

Actual Pounds of Material Purchased *(Actual Price -Standared Price)

35100=Actual Pounds of Material Purchased*(6.30-6)

35100=Actual Pounds of Material Purchased*(.30)

Actual Pounds of Material Purchased=35100/.30

=117000 Pounds

2

OVerhead Efficency variance =(Actual Pounds Used - Standard Pounds)/3

9200=(Actual Pounds Used-16200*7)*3

Actual Pounds Used=116466.67

Direct Material Efficency Variance

=(116466.67-16200*7)*6

=18400 U

3

Material Used

Actual Pounds Used=116467

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