Griffen Company makes pipe using metal. The company uses a standard costing system. Variable overhead is...

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 12,000 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 6 pounds @ $ 5 $ 30.00 Direct labor 2 hours @ $ 25 50.00 Variable overhead 6 pounds @ $ 2 12.00 Fixed overhead 20.00 $ 112.00

August financial results show that the average purchase price of metal was $5.30 per pound. The purchase price variance $34,590 unfavorable. The variable overhead efficiency variance was 8,000 unfavorable. Good output produced totaled 15,000 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? (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?

Solutions

Expert Solution

a)Material purchase price variance =AQ purchased [AR-SR]

34590 = AQ Purchased [5.30 -5]

34590 = AQ Purchased *.30

AQ Purchased = 34590 /.30

= 115300 pounds

b)Variable overhead efficiency variance =SR[AQ used -SQ allowed for actual production]

8000 = 2 [AQ used -SQ allowed for actual production]

[AQ used -SQ allowed for actual production] = 8000/ 2

= 4000

Now ,

Direct material efficiency variance = SR[[AQ used -SQ allowed for actual production]

= 5 *4000 [FROM ABOVE EQUATION ]

= 20000 U

c) Direct material efficiency variance = SR[[AQ used -SQ allowed for actual production]

20000 = 5 [AQ used- (15000*6)]

20000 /5 = [AQ used - 90000]

AQ used = 4000 + 90000

= 94000 pounds

ekkarill92 answered 9 months ago

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