Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture Product W requires three times the number of machine hours required for Product T. Market research indicates that 1,000 additional units of Product W could be sold. The contribution margin by unit of product is as follows:
Definitions:
Total Overhead Variance
The difference between the actual overhead incurred and the standard overhead allocated for the actual production achieved.
Labor Price Variance
The difference between the actual cost of direct labor and the standard cost, reflecting the variance in wages paid.
Direct Material Cost
The cost of raw materials and components that are directly used in the production of a product.
Labor Quantity Variance
The difference between the actual hours worked and the standard hours allowed for the work performed, multiplied by the standard hourly wage rate.
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