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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
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 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 pound @ $ $
Direct labor hours @ $
Variable overhead pound @ $
Fixed overhead
$
March financial results show that the average purchase price of metal was $ per pound. The purchase price variance was $ The variable overhead efficiency variance was $ favorable. Good output produced totaled units.
Required:
a How many pounds of metal were purchased in March?
b What was the direct materials efficiency variance in March?
Note: Indicate the effect of this 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 March?
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