Giovanni Company produces a product that requires four standard gallons per unit
ID: 2719123 • Letter: G
Question
Giovanni Company produces a product that requires four standard gallons per unit. The standard price is $34.00 per gallon. Assume the company produced 3,500 units of product. The 3,500 units required 14,400 gallons, which were purchased at $33.25 per gallon. The product requires five standard hours per unit at a standard hourly rate of $30 per hour. The 3,500 units required 17,700 hours at an hourly rate of $30.50 per hour. The standard variable overhead cost per unit is $3.50 per hour. The actual variable factory overhead was $63,400. The standard fixed overhead cost per unit is $1.80 per hour at 17,000 hours, which is 100% of normal capacity.
Explanation / Answer
Working:
1.Materials price variance = (Standard Price - Actual price)*Actual Quantity
Materials price variance = (34-33.25)*14400
Materials price variance = 10800 Favorable
2. Materials usage/quantity variance = (Standard Quantity - Actual Quantity)Standard Price
Materials usage/quantity variance = (4*3500 - 14400)*34
Materials usage/quantity variance = $ 13600 Unfavorable
3. Labor rate variance = (Standard Rate - Actual Rate)*Actual Hour
Labor rate variance = (30-30.50)*17700
Labor rate variance = $ 8850 Unfavorable
4. Labor efficiency variance = (Standard Hour - Actual Hour)Standard Rate
Labor efficiency variance = (5*3500-17700)*30
Labor efficiency variance = 6000 Unfavorable
5.Factory overhead controllable = (Standard Rate*Actual Hour - Actual cost)
Factory overhead controllable = (3.50*17700 - 63400)
Factory overhead controllable = $ 1450 Unfavorable
6. Factory overhead volume = (17500-17700)*3.50 + (17500 - 17000)*1.80
Factory overhead volume = $ 200 Favorable
Giovanni Company Income Statement Through Gross Profit For the Year Ended December 31, 2014 Sales 1400000 Cost of goods sold at Standard 1093750 Gross profit-at standard 306250 Favorable Unfavorable Less variances from standard cost: Direct materials price 10800 Direct materials quantity 13600 Direct labor rate 8850 Direct labor time 6000 Factory overhead controllable 1450 Factory overhead volume 200 18900 Gross profit 287350