A Manufacturer of Paint Has Two Factories Located in France

question 45

Essay

A manufacturer of paint has two factories located in France and Spain and due to economic conditions must close one of them. The factory productivity data is as follows:
$$\begin{array} { | l | c | c | } \hline & \text { Gallons of Paint } & \text { Resource Cost } \\\hline \text { Factory (France) } & \text { Produced (in 1,000s) } & \text { per Gallon } \\\hline \text { Factory (Spain) } & 4,600 & \$ 4.25 \\\hline\end{array}$$

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual and expected (or standard) use of variable overheads based on the actual activity levels.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies directly with the level of production, such as utility costs for machinery.

Particular Product

Refers to a specific item or product line that a company manufactures or sells.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead, based on a predetermined rate.