Gibson Manufacturing Company set its standard variable manufacturing cost at $28 per unit of product. The company planned to make and sell 3,500 units of product during Year 3. More specifically, the master budget called for total variable manufacturing cost to be $98,000. Actual production during Year 3 was 3,600 units, and actual variable manufacturing costs amounted to $101,690. The production supervisor was asked to explain the variance between budgeted and actual cost ($101,690 - $98,000 $3,690). The supervisor responded that she was not responsible for the variance that was caused solely by the increase in sales volume controlled by the marketing department. Required a. Determine the flexible budget variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance). b. Do you agree with the production supervisor?
Gibson Manufacturing Company set its standard variable manufacturing cost at $28 per unit of product. The company planned to make and sell 3,500 units of product during Year 3. More specifically, the master budget called for total variable manufacturing cost to be $98,000. Actual production during Year 3 was 3,600 units, and actual variable manufacturing costs amounted to $101,690. The production supervisor was asked to explain the variance between budgeted and actual cost ($101,690 - $98,000 $3,690). The supervisor responded that she was not responsible for the variance that was caused solely by the increase in sales volume controlled by the marketing department. Required a. Determine the flexible budget variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance). b. Do you agree with the production supervisor?
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 17P: Shinto Corp. uses a standard cost system and manufactures one product. The variable costs per...
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
ll.
Subject:- Accounting
Transcribed Image Text:Gibson Manufacturing Company set its standard variable manufacturing cost at $28 per unit of product. The company planned to
make and sell 3,500 units of product during Year 3. More specifically, the master budget called for total variable manufacturing cost to
be $98,000. Actual production during Year 3 was 3,600 units, and actual variable manufacturing costs amounted to $101,690. The
production supervisor was asked to explain the variance between budgeted and actual cost ($101,690 - $98,000 $3,690). The
supervisor responded that she was not responsible for the variance that was caused solely by the increase in sales volume controlled
by the marketing department.
Required
a. Determine the flexible budget variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U).
Note: Select "None" if there is no effect (i.e., zero variance).
b. Do you agree with the production supervisor?
a. Flexible budget variance
b. Do you agree with the production supervisor?
$ 3,690 U
No
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning