You have recently accepted a position with Vitex, Inc., the manufacturer of a po

Question

You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study. On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information: Standard Cost Card Direct materials, 6 pounds at $3 per pound $ 18.00 Direct labor, 0.8 direct labor-hours at $15 per direct labor-hour $ 12.00 Variable manufacturing overhead, 0.8 direct labor-hours at $3 per direct labor-hour $ 2.40 Total Standard Cost* Variances Reported Price or Rate Quantity or Efficiency Direct materials $ 405,000 $ 6,900 F $ 9,000 U Direct labor $ 270,000 $ 14,550 U $ 21,000 U Variable manufacturing overhead $ 54,000 $ 1,300 F $ ? † U *Applied to Work in Process during the period. † Entry obliterated. You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored. It is now 8:30 a.m. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary “backup” data for the variances before the meeting begins. Without backup data it will be impossible to lead the discussion or answer any questions.

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

Req 1: Actual number of units produced: Std material cost per unit     $ 18 per unit Std material cost for actual production $ 405,000 Actual ouput (405,000 /18 ) = 22,500 units Req 2: Direct material purchased and used Std price per pound   $ 3 per pound' Std Qty required per unit of output 6 pounds' Std Qty required for actual output (22500*6) = 135,000 pounds' Material Qty Variance= 9000 U Material Qty variance = Std price per pound (Std qty for actual output - Actual Qty used)     - 9000 = 3 ( 135,000 - Actual Qty consumed) Actual Qty consumed= 138,000 pounds Req 3: Actual cost per pound of material material price variance 6900 F Material Price variance = Actual Qty consumed (Std price per pound - Actual Price per pound)     6900 = 138000(3- Actual price) Actual price of material per pound= $ 2.95 per pound Req 4: Actual Direct labour worked. Std rate per labour hour = $ 15 per hour Std labour hour per unit of output = 0.8 hour per unit Std labour hours required for actual output (22500*0.8) = 18,000 labour hours Labour Efficiency Variance= 21,000 U Labour efficiency Variance = Std rate per hour (Std hours for actual output - Actual labour hours worked)     - 21,000 = 15 ( 18,000 - Actual hours worked) Actual hours worked= 19,400 hours

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