Rogen Corporation manufactures a single product. The standard cost per unit of p

Question

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

The predetermined manufacturing overhead rate is $14 per direct labor hour ($14.00 ÷ 1.00). It was computed from a master manufacturing overhead budget based on normal production of 5,300 direct labor hours (5,300 units) for the month. The master budget showed total variable costs of $37,100 ($7.00 per hour) and total fixed overhead costs of $37,100 ($7.00 per hour). Actual costs for October in producing 4,600 units were as follows.

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. (Round answers to 0 decimal places, e.g. 125.)

(b)

Compute the total overhead variance.

Direct materials—1 pound plastic at $7 per pound $ 7.00 Direct labor—1.00 hours at $11.65 per hour 11.65 Variable manufacturing overhead 7.00 Fixed manufacturing overhead 7.00 Total standard cost per unit $32.65

Explanation / Answer

Calculation of Material variances:

            Given Standard Rate (SR) = $7 per pound

                     Standard Quantity (SQ) = 5300

                     Actual Rate (AR) = 33,867/4770 = $7.10

                    Actual Quantity = 4770 pounds

Now, Material Price variance = AQ*SP - (AQ*AP) = 4770* (7-7.10) = 477 unfavourable

          Material Quantity variance = SQ*SP -(AQ*SP) = (5300-4770) *7 = 3,710 favourable

          Total Material Variance = SQSP - (AQAP) = 5300*7 - (4770*7.10) = 3,233 favourable.

Now, Calculating labour variances:

           Given, Standard rate per labour hour (SR) = $ 11.65

                      Actual rate (AR) = 52,614/4,440 = $ 11.85

                       Standard hours (SH) = 5,300 hours

                     Actual hours (AH) = 4,440 hours

       Labor price variance = SR*AH - AR*AH = (11.60-11.85) * 4440 = 1,110 unfavourable

       Labour quantity variance = SR*SH - SR*AH = 11.60 * (5300-4440) = 9976 favourable

       Total Labour variance = SR*SH - AR*AH = (11.60*5300) - (11.85*4440) = 8866 favourable

Now Calculating Total Variable overhead variance:

               Standard rate(SR) = $7 per labour hour

                Actual rate(AR) = 48,942/4440 = $ 11.02

               Standard hours(SH) = 5300

               Actual hours(AH)= 4440

         Variable overhead variance = SR*SH - AR*AH = (7*5300) - 48,942 = 11,842 unfavourable

          Fixed overhead variance = (7*5300) - 17,258 = 19,842 favourable

          Total overhead variance = 11842-19842 = 8000 favourable.

               

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