Question

Gleason Guitars produces acoustic guitars. The table below contains budget and actual information for the month of June:(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

Calculation of Variances is shown as follows:- (Amounts in $)

	Actual Costs 225 Units (A)	Spending Variance (B-A)	Flexible Budget 225 Units (B)	Volume Variance (C-B)	Master Budget 200 Units (C)
Direct Material	15,500	250 F	15,750 (14,000*225/200)	1,750 U	14,000
Direct Labor	26,200	1,450 U	24,750 (22,000*225/200)	2,750 U	22,000
Variable Overhead	8,250	750 F	9,000 (8,000*225/200)	1,000 U	8,000
Fixed Overhead	11,500	500 U	11,000	0	11,000
Total Manufacturing Costs	61,450	950 U	60,500	5,500 U	55,000

Therefore total spending variance is $950 Unfavorable and total volume variance is $5,500 Unfavorable.

Note:-

1) Fixed overhead would remain same irrespective of change in units (i.e. for both level of units, budgeted fixed overhead is $11,000).