Giovanni Company produces a product that requires five standard hours per unit at a standard hourly rate of $30 per hour

Giovanni Company produces a product that requires five standard hours per unit at a standard hourly rate of $30 per hour. If 3,500 units required 17,700 hours at an hourly rate of $30.50 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance?

Answer:

a. Direct labor rate 

variance (unfavorable) 

$8,850 [($30.50 – $30.00) × 17,700 hrs.] 

b. Direct labor time 

variance (unfavorable) 

$6,000 [(17,700 hrs. – 17,500 hrs.) × $30.00] 

c. 

 

Direct labor cost 

variance (unfavorable) 

 

$14,850 

 

($8,850 + $6,000) or 

[($30.50 × 17,700 hrs.) – ($30.00 × 17,500 hrs.)] 

= $539,850 – $525,000 

Giovanni Company produced 3,500 units of product that required five standard hours per unit

Giovanni Company produced 3,500 units of product that required five standard hours per unit. The standard variable overhead cost per unit is $3.50 per hour. The actual variable factory overhead was $63,400. Determine the variable factory overhead controllable variance.

Answer:

Variable Factory Overhead 

Controllable Variance  =  $63,400 – [$3.50 × (3,500 units × 5 hrs.)] 

Variable Factory Overhead 

Controllable Variance 

Variable Factory Overhead 

Controllable Variance 

 

=  $63,400 – $61,250 

=  $2,150 Unfavorable 

Dvorak Company produced 1,000 units of product that required three standard hours per unit. The standard fixed overhead cost per unit

Dvorak Company produced 1,000 units of product that required three standard hours per unit. The standard fixed overhead cost per unit is $0.60 per hour at 3,500 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.

Answer:
$300 unfavorable $0.60 × [3,500 hrs. – (1,000 units × 3 hrs.)]


Giovanni Company produced 3,500 units of product that required five standard hours per unit. The standard fixed overhead cost per unit is $1.80 per hour at 17,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.

Answer:

–$900 favorable $1.80 × [17,000 hrs. – (3,500 units × 5 hrs.)] 

Giovanni Company produced 3,500 units that require four standard gallons per unit at $34.00 standard price per gallon

Giovanni Company produced 3,500 units that require four standard gallons per unit at $34.00 standard price per gallon. The company actually used 14,400 gallons in production. Journalize the entry to record the standard direct materials used in production.

Answer:

Work in Process (14,000* gal. × $34.00) 476,000  

Direct Materials Quantity Variance** 13,600  

Materials (14,400 gal. × $34.00)  489,600 

* 3,500 units × 4 standard gal. per unit 

** [(14,400 gal. – 14,000 gal.) × $34.00] 

Prepare a 2014 income statement through gross profit for Giovanni Company, using the variance data in Practice

Prepare a 2014 income statement through gross profit for Giovanni Company, using the variance data in Practice Exercises 23-1A, 23-2A, 23-3A, and 23-4A. Assume Giovanni sold 3,500 units at $400 per unit.

Answer:

GIOVANNI COMPANY 

Income Statement Through Gross Profit 

For the Year Ended December 31, 2014 

Sales (3,500 units × $400) $1,400,000 

Cost of goods sold—at standard* 1,093,750 

Gross profit—at standard $   306,250 

    F

avorable Unfavorable  

Less variances from standard cost:    

Direct materials price (PE23–1A) $10,800   

Direct materials quantity (PE23–1A)  $13,600  

Direct labor rate (PE23–2A)  8,850  

Direct labor time (PE23–2A)  6,000  

Factory overhead controllable (PE23–3A)  2,150  

Factory overhead volume (PE23–4A) 900  (18,900) 

Gross profit   $   287,350 

    

* Direct materials (3,500 units × 4 gal. × $34.00)…………………………………………………… 

 

$  476,000 

Direct labor (3,500 units × 5 hrs. × $30.00)……………………………………………………… 525,000 

Factory overhead [3,500 units × 5 hrs. × ($3.50 + $1.80)]………………………………………   92,750 

Cost of goods sold at standard……………………………………………………………………… $1,093,750