Compute all of the materials and labor variances. Problem 23-1A (part level subm
ID: 2480124 • Letter: C
Question
Compute all of the materials and labor variances.
Problem 23-1A (part level submission) Costello Corporation manufactures a single product. The standard cost per unit of product is shown below Direct materials-2 pound plastic at $7.42 per pound Direct labor-1.50 hours at $12.00 per hour Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit $ 14.84 18.00 9.00 6.00 $47.84 The predetermined manufacturing overhead rate is $10 per direct labor hour ($15.00 ÷ 1.50). It was computed from a master manufacturing overhead budget based on normal production of 7,800 direct labor hours (5,200 units) for the month. The master budget showed total variable costs of $46,800 ($6.00 per hour) and total fixed overhead costs of $31,200 ($4.00 per hour). Actual costs for October in producing 4,400 units were as follows Direct materials (8,920 pounds) Direct labor (6,430 hours) Variable overhead Fixed overhead $67,257 79,603 50,026 17,844 $214,730 Total manufacturing costs 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 ignoredExplanation / Answer
Material Price Variance= ( Standard cost per pound of Material- Actual cost per pound of Material) x Actual Quantity Used
= (Standard cost per pound of Material x Actual Quantity Used) x (Actual cost per pound of Material x Actual Quantity Used)
= (7.42 x 8,920 )-(67,257)
=$66,186-$67,257
=$1,071 U
Standard Qty= Standard Quantity for Actual Production
= Standard Quantity required for one unit x No of units produced
=2 x 4,400=8,800 pounds
Material Quantity Variance= ( ,Standard Qty l- Actual Qty) x Standard Price per pound
=(8,800- 8,920) x 7.42
=- 120 x 7.42
=$890.4 U
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Total Material Variance = Material Price Variance+ Material Quantity Variance
=$1,071 U +$890.4 U
=$1,961 U
Labor Rate Variance= ( Standard Rate per hr of Labor- Actual Rate per hr of Labor-) x Actual hrs worked
= (Standard Rate per hr of Labor x Actual hrs worked) - (Actual cost per pound of Material x Actual hrs worked)
=($12 x 6,430) -79,603
= $77,160 -$79,603
=$2,443 U
Standard hrs= Standard hrs for Actual Production
= Standard hrs required for one unit x No of units produced
=1.5 x 4,400=6,600 hrs
Labor Quantity Variance = ( ,Standard hrs- Actual hrs) x Standard Rate per labor hr
=(6.600- 6,430) x 12
=- 170 x 12
=-$2,040 U
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Total Labor Variance = Labor Rate Variance= + Labor Quantity Variance
=$2,443 U +$2,040 U
=$4,483 U
Total Material Variance=$1,961 Unfovourable
Material Price Variance=$1,071 Unfovourable
Material Quantity Variance=$890.4 Unfovourable
Total Labor Variance=$4,483 Unfovourable
Labor Rate Variance=$2,443 Unfovourable
Labor Rate Variance= -$2,040 Unfovourable
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