Case 10-17 Working Backwards from Variance Data [LO10-1, LO10-2, LO10-3] Vitex,

Question

Case 10-17 Working Backwards from Variance Data [LO10-1, LO10-2, LO10-3] Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system Standard Cost (1) Standard Quantity or Hours Standard Price or Rate Inputs er Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 2.30 pounds 1.00 hours 16.80 pound 38.64 $15.60 per hour $15.60 9.50 per hour 9.50 $63.74 1.00 hours Total Variances Reported Standard Price Quantity on Rate Efficiency Cost* or Direct materials $618,240 $11,252 F $33,600 U Direct labor $249,600 3,400 U $15,600 U Variable manufacturing overhead $152,000 $ 4,400 F $?' U Applied to Work in Process during the period The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored Required 1. How many units were produced last period? 2. How many pounds of direct material were purchased and used in production? 3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.) 4. How many actual direct labor-hours were worked during the period? 5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.) 6. How much actual variable manufacturing overhead cost was incurred during the period?

Explanation / Answer

1. No of units produced = Total standard cost/standard cost per unit = 618240/38.64 = 16000 units

2. Pounds of direct material purchased and used in production:

Material quantity variance = (standard quantity-actual quantity) standard price

-33600 = (16000*2.3-X) *16.800

-33600 = (36800-x) *16.80

-33600 = 618240-16.80X

16.60X = 618240+33600

X= 38,800

X (actual quantity purchased and used) = 38800 pounds

3. Actual cost per pound:

Material price variance = (standard price-actual price) actual quantity

11252   = (16.80-X) 38800

11252 = 651840-38800X

38800X     = 651840-11252

38800X=650588

X = 650588/38800

X=16.51

X (actual cost per pound) = 16.51

4.) Calculate actual direct labor hours worked:

Direct labor efficiency variance = (standard hours-actual hours) standard rate

-15600 = (16000-X) 15.60

-15600 = 249600-15.60X

15.6X     = 249600+15600

15.6X=265200

X=265200/15.6

X= 17000

x (actual direct labor hours)   = 17000 Hours

5. Actual rate per direct labor hour:

Labor rate variance = (standard rate-actual rate) actual hours

-3400     = (15.60-X) 17000

-3400      = 265200-17000X

17000X      = 265200+3400

17000X=268600

X= 15.8

X (Actual rate per direct labor hour) = 15.8 per hour

6) Actual variable overhead cost:

= (16000*1-17000)*95

Variable overhead efficiency variance = 9500 U

Total variable overhead cost variance = 9500 U+4400 F = 5100 U

Actual variable overhead = standard overhead+ Unfavorable variance

                                    = 152000+5100

Actual variance overhead = 157100

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