Highland Company produces a lightweight backpack that is popular with college st

Question

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:

Overhead is applied to production on the basis of direct labor-hours. During March, 400 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:

*For the month's production.

The following additional information is available for March’s production:

Required:

Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements.

1. What is the standard cost of a single backpack?

2. What was the actual cost per backpack produced during March?

3. How many yards of material are required at standard per backpack?

4. What was the materials price variance for March if there were no beginning or ending inventories of materials?

5. What is the standard direct labor rate per hour?

6. What was the labor rate variance for March? The labor efficiency variance?

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance?

8. Prepare a standard cost card for one backpack.

Standard Quantity
or Hours Standard Price
or Rate Standard
Cost Direct materials ? $ 6.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ?

Explanation / Answer

1. $37.8 (Note-2)

2. $37.6 (Note-2)

3. 1840 Yards        (Note-1)

4.

Material Statement Standard (400 Units) Actual (400 Units) Yards Price Amount Yards Price Amount 1520 6 9120 1840 3 5520 (1) Note -1 Material Quantity Variance = (Standard Quantity -Actaul Quantity) * Standard Price 1920(U) = (1520 - Actual Quantity) * 6 -1920/6 = 1520 - Actual Quantity Actual Quantity =1840 Labour Statement Standard (400 Units) Actual (400 Units) Hours Rate Amount Hours Rate Amount 480 10.5 5040 600 11.5 6900 (From Variable Mfg overhead) 6900/600 (2) Note-2 Statement Showing Total Cost Per Backpack Particulars Standard Actual Material 22.8 13.8 (9120/400) (5520/400) Labour 12.6 17.25 (5040/400) (Balancing Figure ie 37.6-13.8-6.55) Variable Manufacturing Overhead 2.4 6.55 (960/400) (2620/600) 37.8 37.6 {37.8-0.2 ie.favourable cost variance} and where actual labour cost = 400 * 17.25 = 6900 Variable Manufacturing overhead Statement Standard (400 Units) Actual (400 Units) Hours Rate Amount Hours Rate Amount 480 2 960 600 4.36 2620 (960/2)

1. $37.8 (Note-2)

2. $37.6 (Note-2)

3. 1840 Yards        (Note-1)

4.

Material price variance = (Standard price - Actual price) * Actual Quantity = (6-3)*1840 =5520

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