Seat Corp. makes plastic folding chairs. The following information is available

ID: 2480319 • Letter: S

Question

Seat Corp. makes plastic folding chairs. The following information is available regarding the standard cost of making a chair:

o It should cost $4 per kilogram to purchase the plastic used to make chairs.

o It should take 0.25 labor hours to make a chair.

o Overhead is allocated using direct labor hours as the allocation base.

o Total standard cost of a chair is $13.

The following information is available regarding actual results for the past month:

o Actual production and sales were 24,000 chairs.

o Actual material used was 37,500 kilograms and actual material cost for the month was $157,500.

o Material price variance was 7,500 unfavorable.

o Material efficiency variance was 6,000 unfavorable.

o Direct labor price variance was 4,560 unfavorable.

o Actual direct labor hours worked was 5,700 and actual labor cost for the month was $95,760.

o They under-applied their overhead by $3,000.

Required:

a) Calculate the material and labor variances for the month,

b) Assume all overhead is fixed. What are the actual and applied overhead amounts?

Material Variance = Material price variance unfavorable + Material efficiency variance unfavorable =7500+6000 =13500

labor variances

Labor variance =96000-95760 =$240 Favourable

) Assume all overhead is fixed. What are the actual and applied overhead amounts?

Direct material Standard Cost to manufacture 24000 chair = Actual Cost +-Material variance unfavourable =

157500-13500=144000

Standard qty required to manufacture 24000 units =144000/4 =36000 kilogram

Hence qty per unit required =36000/24000 =1.5 kilogram plastic for a unit of chair

So unit Cost 1.5*4 =$6 per chair

AQP*SH*SR Actual hour *SR Actual Labor cost 24000*.25*16 95760-4560 Given 96000 91200 95760

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