Larned Company makes a storage box using metal. The company uses a standard costing system. Variable...
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Larned Company makes a storage box 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 13,500 units. Larned 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 single box follows: Direct material Direct labor Variable overhead Fixed overhead 0.5 pounds @ $8 $ 4.00 0.2 hours @ $30 6.00 0.5 pounds @ $4 2.00 3.00 $15.00 March financial results show that the average purchase price of metal was $8.20 per pound. The purchase price variance was $1,540. The variable overhead efficiency variance was $1,200 favorable. Good output produced totaled 12,000 units. Required a. How many pounds of metal were purchased in March? b. What was the direct material efficiency variance in March? c. How many pounds of metal were used in March? d. Which, if either, of the direct material variances (price or efficiency) would you recommend Larned management investigate? Why? Larned Company makes a storage box 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 13,500 units. Larned 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 single box follows: Direct material Direct labor Variable overhead Fixed overhead 0.5 pounds @ $8 $ 4.00 0.2 hours @ $30 6.00 0.5 pounds @ $4 2.00 3.00 $15.00 March financial results show that the average purchase price of metal was $8.20 per pound. The purchase price variance was $1,540. The variable overhead efficiency variance was $1,200 favorable. Good output produced totaled 12,000 units. Required a. How many pounds of metal were purchased in March? b. What was the direct material efficiency variance in March? c. How many pounds of metal were used in March? d. Which, if either, of the direct material variances (price or efficiency) would you recommend Larned management investigate? Why?
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aThe amount of metal purchased in March can be calculated by taking the purchase price variance and ... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
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