Gosslin Manufacturing has two direct cost categories: direct materials and direc
ID: 2483855 • Letter: G
Question
Gosslin Manufacturing has two direct cost categories: direct materials and direct labor costs. The company's variable manufacturing overhead is allocated to products based on standard direct labor hours. The following information indicates the standards of Gosslin's manufacturing costs: Direct Cost Categories: Standard Quantity Cost per Input Unit Direct Materials 10 pounds per output unit $9 per pound Direct Labor 8 hours per output unit $16 per hour Manufacturing Overhead: Cost per Input Unit Variable Manufacturing Overhead $15 per Direct Labor Hour By the end of September 2010 Gosslin Manufacturing records indicated the following: Direct materials purchased and used $11.49 per pound 87,000 pounds Direct labor $13 per hour 49,000 labor hours Total actual variable manufacturing overhead $350,000 Actual production 19,000 output units Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number. Enter the variances as positive values. Calculate the following variances. a) Direct materials price variance. $Answer AnswerFavorableUnfavorable b) Direct materials efficiency variance. $Answer AnswerFavorableUnfavorable c) Direct labor price variance $Answer AnswerFavorableUnfavorable d) Direct labor efficiency variance. $Answer AnswerFavorableUnfavorable e) Variable manufacturing overhead spending variance. $Answer AnswerFavorableUnfavorable f) Variable manufacturing overhead efficiency variance. $Answer AnswerFavorableUnfavorable
Explanation / Answer
Answer:
a) Direct material price variance = AQ (SP - AP)
= 87000 pounds ($9 - $11.49)
= 87000 pounds *(-$2.49)
= $216630 U
b) Direct material efficiency variance = SP ( SQ - AQ)
= $9 per pound (190000 - 87000 )
= $9 * 103000 pounds
= $927000 F
Working note:
Computation of SQ:
Actual units produced = 19000 units
Standard quantity per unit = 10 pounds per unit
Standard quantity of direct materials = Actual units produced * Standard quantity per unit
= 19000 units *10 pounds per unit
= 190000 pounds
c) Direct labor price variance = AH ( SR - AR )
= 49000 hours ( $16 - $13)
= 49000 * $3
= $147000 F
d) Direct labor efficiency variance = SR ( SH - AH )
= $16 per hour ( 152000 - 49000 )
= $16 per hour * 103000 hours
= $1648000 F
Working note:
Computation of SH:
Actual units produced = 19000 units
Standard hours per unit = 8 hours per unit
Standard hours = Actual production * standard hours per unit
= 19000 units* 8 hours per unit
= 152000 hours
e) Variable overhead spending variance = (SVR * AH) - Actual variable overhead
= ($15 per DLH * 49000 hours) - $350000
= $735000 - $350000
= $385000 F
f) Variable overhead efficiency variance = SVR ( SH - AH )
= $15 per direct labor hour ( 152000 - 49000 )
= $15 * 103000
= $1545000 F
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