Gemma Products produces and sells a variety of domestic goods including sheets. In the current year, the company budgeted for the production and sale of 10,000 sets; however, 12,000 sets were actually produced and sold. Each set has a standard requiring 10 yards of material at a cost of $1.10 per yard and 20 minutes of direct labor (for sewing, assembly, and inspection) at a cost of $.20 per minute. Actual costs for the production of 12,000 sets were $138,240 for materials (128,000 yards purchased and used @ $1.08 per yard) and $55,200 for labor (230,000 minutes @ $.24 per minute).
Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).

Question

Quizplus · Accepted Answer

The Answer of Gemma Products produces and sells a variety of domestic goods including sheets. In the current year, the company budgeted for the production and sale of 10,000 sets; however, 12,000 sets were actually produced and sold. Each set has a standard requiring 10 yards of material at a cost of $1.10 per yard and 20 minutes of direct labor (for sewing, assembly, and inspection) at a cost of $.20 per minute. Actual costs for the production of 12,000 sets were $138,240 for materials (128,000 yards purchased and used @ $1.08 per yard) and $55,200 for labor (230,000 minutes @ $.24 per minute).
Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).

Gemma Products Produces and Sells a Variety of Domestic Goods