At the Beginning of the Year, Goodman Company Had the Following

question 138

Essay

At the beginning of the year, Goodman Company had the following standard cost sheet for one of its food products: $\begin{array}{lr}\text { Direct materials ( } 10 \mathrm{~kg} @ 3.20 \text { per kilogram) } & \$ 32.00 \\\text { Direct labour (4 hours }(\$ 9.00 \text { per hour) } & 36.00 \\\text { Fixed overhead (4 hours }(\$ 4.00 \text { per hour) } & 16.00 \\\text { Variable overhead (4 hours }(\omega, \$ 0.75 \text { per hour) } & 3.00\\\text { Standard cost per unit }&\$87.00\end{array}$ The company computes its overhead rates using practical volume, which is 72,000 units. The actual results for the year are: $$\begin{array} { l r } \text { Units produced } & 70,000 \\\text { Direct labour hours } & 290,000 \\\text { Actual wage per hour } & \$ 9.05 \\\text { Fixed overhead } & \$ 1,160,000 \\\text { Variable overhead } & \$ 218,000\end{array}$$ Required:
A. Compute the fixed overhead spending and volume variances.
B. Compute the variable overhead spending and efficiency variances.

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Definitions:

Wheel Bearing

Any of several types of bearings that reduce friction at the interface of the axle and the hub.

Rear Axle

The axle located at the rear of a vehicle, transmitting power from the drivetrain to the rear wheels.

Wheel Cylinder

An output cylinder in a drum brake assembly. The wheel cylinder contains pistons that move the brake shoes against the drum when the brakes are applied.

Drum Micrometer

A precision measuring tool used to accurately measure the inside diameter of brake drums.