Griffen Company makes pipe using metal. The company uses a standard costing syst
ID: 2570232 • 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 13,300 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:
August financial results show that the average purchase price of metal was $8.50 per pound. The purchase price variance $35,250 unfavorable. The variable overhead efficiency variance was 9,300 unfavorable. Good output produced totaled 16,300 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.)
Direct material 8 pounds @ $ 8 $ 64.00 Direct labor 4 hours @ $ 27 108.00 Variable overhead 8 pounds @ $ 4 32.00 Fixed overhead 22.00 $ 226.00Explanation / Answer
a)Purchase price variance =AQ purchased [AR-SR]
35250 = AQ [8.50-8]
35250 = .50 AQ
AQ = 35250/.50
= 70500 metal purchased
2)Material efficiency variance =SR [AQ uSed-SQ]
= 8[132725-(16300*8)]
= 8[132725 -130400]
= 8*2325
= 18600 U
**Actual quantity used is calculated in part c..
3)variable overhead efficiency variance = Standard variable overhead rate [Actual material used -standard material for actual output]
= 9300 = 4[AQ-(16300*8)]
9300/4 = AQ- 130400
2325 =AQ-130400
AQ = 2325+130400 = 132725 metal
actual quantity used : 132725
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.