Hello, I need help with the following problem. 2014 LOWELL company began the man

Question

Hello,

I need help with the following problem.

2014 LOWELL company began the manufacture of a new paging known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit follow: DM (2lb @ $3 per lb); DL (1/2 hr @ 16 per hour); MOH (80% of direct manuf. labor costs) The following data were obtained from Lowell;s records for the month of May:

Rev 150k (cr)

A/P (control) 36,300 (cr)

dm price variance 4500 (dr)

dm efficiency variance 2900 (dr)

direct manuf labor price variance 1700 (dr)

direct manuf labor efficiency variance 2000 (cr)

Actual production in May was 4,700 units of Dandy and actual sales in May were 3000 units. The amout shown for dm price variance applies to materials purchased during May. There was no begin. inventory of materials on May 1, 2014

Compute each of the following for May (Show computations)

1) Standard direct anuf allowed for actual output produced

2) actual direct manufacturing labor hours worked

3) actual direct manufacturing labor wage rate

4) standard quantity of dm allowed in pounds

5) actual quanitity of dm used in pounds

6) actual quantity of dm purchased in pounds

7) Actual dm price per pound.

Thank you.

Explanation / Answer

1. Standard direct manufacturing labour hours allowed for actual output produced = 4,700 x 1/2 = 2,350 hours

2. Labor efficiency variance = (standard hours - actual hours) x standard rate
2,000 = (2,350 - actual hours) x 16
Actual direct manufacturing labor hours worked = 2,225 hours

3. Labor price variance = (standard rate - actual rate) x actual hours
-1,700 = (16 - actual rate) x 2,225
Actual direct manufacturing labor wage rate = $16.764 per hour

4. Standard quantity of direct material allowed = 4,700 x 2 = 9,400 pounds

5. Material efficiency variance = (standard material - actual material) x standard rate
-2,900 = (9,400 - actual material) x 3
Actual quanitity of dm used in pounds = 10,367 pounds

6. Material price variance = (standard price - actual price) x actual quantity
-4,500 = (standard price x actual quantity) - (actual price x actual quantity)
-4,500 = (3 x actual quantity) - 36,300
Actual quantity of dm purchased in pounds = 10,600

7. Actual dm price per pound = 36,300/10,600 = $3.423 per pound

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