Question
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 14,800 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 | 0.5 pound @ $8 | $ 4.00 |
---|---|---|
Direct labor | 0.2 hours @ $30 | 6.00 |
Variable overhead | 0.5 pound @ $4 | 2.00 |
Fixed overhead | 3.00 | |
$ 15.00 |
March financial results show that the average purchase price of metal was $8.85 per pound. The purchase price variance was $1,670. The variable overhead efficiency variance was $1,330 favorable. Good output produced totaled 13,300 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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