costello corporation manufactures a single product. The standard cost per unit o
ID: 2373390 • Letter: C
Question
costello corporation manufactures a single product. The standard cost per unit of product is shown below:
Direct materials - 2 pound plastic at $7.71 per pound - $15.42
Direct labor - 2.00 hours at $11.00 per hour - $22.00
Variable Manufacturing overhead - $12.00
Fixed Manufacturing overhead - $16.00
Total standard cost per unit - $65.42
The predetermined manufacturing overhead rate of $14 per direct labor hour ($28.00 / 2.00). It was computed from a master manufacturing overhead budget based on normal production of 10,200 direct labor hours (5,100 units for the month). The master budget showed total variable costs of $61,200 ($6.00 per hour) and total fixed overhead costs of $81,600 ($8.00 per hour). Actual costs for October in producing 4,200 units were as follows:
Direct materials (8,570 pounds) - $67,189
Direct labor (8,270 hours) - $93,368
Variable overhead - $89,609
Fixed overhead - $30,021
Total manufacturing costs - $280,187
The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.
A. Compute all of the materials and labor variances and favorable/unfavorable/neither
Total materials variances
Materials price variances
Materials quantity variances
Total labor variance
Labor price variance
Labor quantity variance
B. Compute the total overhead variance.
Explanation / Answer
example................................Sprague Company's standard materials cost per unit of output is $10 (2 pounds X $5). During July, the company purchases and uses 3,300 pounds of materials costing $16,731 in making 1,500 units of finished product. Compute the total, price, and quantity materials variances. Find the total materials variance? .......................................................................................................solution...............................................................................................................The company paid more for materials than the standard price of $5/lb. They paid ($16,731 / 3,300 lbs) = $5.07/lb., so the materials price variance is going to be unfavorable. Materials price variance = AQ * (AP - SP) = 3,300 * ($5.07 - $5.00) = $231.00 (Unfavorable) ------------------------------- The company used more materials than the standard allowed for 1,500 units. The standard says that 1,500 units * 2 lbs per unit = 3,000 lbs should have been used, but the company used 3,300 lbs., so the materials quantity variance is going to be unfavorable. Materials quantity variance = SP * (AQ - SQ) = $5.00 * (3,300 - 3,000) = $1,500 (Unfavorable) Total materials variance = $231 + $1,500 = $ 1,731 (Unfavorable) ---------------------------- AQ = Actual Quantity, AP = Actual Price SQ = Standard Quantity, SP = Standard Price
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