Griffen Company makes pipe using metal. The company uses a standard costing syst
ID: 2568296 • Letter: G
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 12,400 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 10 pounds @ $12 $120.00 6 hours @ $29 174.00 10 pounds @ $ 660.00 24.00 $378.00 August financial results show that the average purchase price of metal was $12.80 per pound. The purchase price variance $34,698 unfavorable. The variable overhead efficiency variance was 8,400 unfavorable. Good output produced totaled 15,400 units. Required: a. How many pounds of metal were purchased in August? (Do not round intermediate calculations.) Metals purchased pounds b. What was the direct material efficiency variance in August? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Efficiency variance c. How many pounds of metal were used in August? (Do not round intermediate calculations.) Metals used |poundsExplanation / Answer
1.
Purchase price variance = (standard price – actual price) x Actual quantity purchased
-$ 34,698 = ($ 12 - $ 12.80) x Actual quantity purchased
Actual quantity purchased =- $ 34,698 / - $ 0.80 = 43,372.50 pounds
Metals Purchased = 43,372.50 pounds
2.
Standard quantity for 15,400 units = 15,400 x 10 = 154,000 pounds
Variable overhead efficiency variance = Standard overhead rate x (Standard quantity - Actual quantity)
-$ 8,400 S = $ 6 x (154,000 - Actual quantity)
-$ 8,400 = ($ 6 x 154,000) – ($ 6 x Actual quantity)
$ 6 x Actual quantity = ($ 6 x 154,000) + $ 8,400
Actual quantity = $ 924,000 + $ 8,400
= $ 932,400 /6 = 155,400 pounds
Direct material efficiency variance = (Standard Quantity – Actual Quantity) × Standard Price
= (154,000 – 155,400) x $ 12
= - 1,400 x $ 12 = - $ 16,800 U
Efficiency variance $ 16,800 U
3.
Standard quantity for 15,400 units = 15,400 x 10 = 154,000 pounds
Variable overhead efficiency variance = Standard overhead rate x (Standard quantity - Actual quantity)
-$ 8,400 S = $ 6 x (154,000 - Actual quantity)
-$ 8,400 = ($ 6 x 154,000) – ($ 6 x Actual quantity)
$ 6 x Actual quantity = ($ 6 x 154,000) + $ 8,400
Actual quantity = $ 924,000 + $ 8,400
= $ 932,400 /6 = 155,400 pounds
Metals used = 155,400 pounds
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