Gleason Company Has Developed the Following Standard Cost Data Based

question 137

Essay

Gleason Company has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity.

During the current period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were:
$$\begin{array} { l | l | l } \text { Direct material } ( 380,000 \mathrm { lbs } . ) \ldots \ldots \ldots \ldots \ldots & \$ 779,000 \\\hline \text { Direct labor } ( 63,000 \mathrm { hrs } . ) \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 507,150 \\\hline \text { Fixed overhead } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 365,000 \\\hline \text { Variable overhe ad } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 220,000\end{array}$$ Calculate the variable overhead spending and efficiency variance and the fixed overhead spending
and volume variances. Indicate whether each is favorable or unfavorable.

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Definitions:

Deadweight Loss

Economic efficiency loss occurring when free market equilibrium is not achieved for a good or service.

Revenues

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Tax

A financial charge or levy imposed by a government on individuals or entities to fund public expenditures, thereby shaping economic policies.

Laffer Curve

An illustration of the relationship between tax rates and tax revenue, suggesting there's an optimal tax rate that maximizes revenue.