Problem 23-1A Costello Corporation manufactures a single product. The standard c

Question

Problem 23-1A

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.

The predetermined manufacturing overhead rate is $12 per direct labor hour ($24.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,600 direct labor hours (5,800 units) for the month. The master budget showed total variable costs of $87,000 ($7.50 per hour) and total fixed overhead costs of $52,200 ($4.50 per hour). Actual costs for October in producing 3,200 units were as follows.

Direct materials—1 pound plastic at $7.74 per pound $ 7.74 Direct labor—2.00 hours at $12.00 per hour 24.00 Variable manufacturing overhead 15.00 Fixed manufacturing overhead 9.00 Total standard cost per unit $55.74

Explanation / Answer

1) Material varince

Materials price variance = Actual quantity(Standard Price-Actual Price)

Actual material Price per pound =$ 26,331/3350 pound = $7.86 per pound

=3350 pound($7.74 per pound-$7.86)

= -$402 (U)

Materials quantity variance =(Standard quantity of direct material allowed - actual quantity)* standard price

=((3200unit * 1pound per unit)-3350 pound)$7.74 per pound

=-$1161(U)

Total materials variance = Materials price variance+Materials quantity variance

= -$402 (U)+-$1161(U)

= -$1563(U)

2) Labor variance

Labor price variance =Actual hours(Standard Rate-Actual Rate)

Actual Rate=($77,000/6250hours)= $12.32 per hour

=6250 hours($12-$12.32)

=-$2000 (U)

Labor quantity variance =(Standard hours of direct labour allowed - actual labour hours)* standard rate

=((3200 units*2 hours per unit)-6250 hours) *$12 per hour

=(6400 hours- 6250 hours)*$12 per hour

=$1800 (F)

Total labor variance =Labor price variance +Labor quantity variance

=-$2000 (U)+$1800 (F)

=$200(U)

3)Total overhead variance

Variable overhead variance =Standard VOH for actual units - Actual VOH

= (3200 units*$15)-$58,596

= $48,000- $58,596

= -$10,596(U)

Fixed overhead variance =Standard FOH for actual units - Actual FOH

=(3200 units*$9)-$20,364

= $28,800-$20,364

= $8436 (F)

Total overhead variance = Variable overhead variance+ Fixed overhead variance

= -$10,596(U) +$8436 (F)

= - 2160 (U)

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.