Great Fender, which uses a standard cost system, manufactured 20,000 boat fender
ID: 2573991 • Letter: G
Question
Great Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 145,000 square feet of extruded vinyl purchased at $1.20 per square foot. Production required 420 direct labor hours that cost $15.50 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.25 per square foot. The labor standard was 0.025 direct labor hour per fender, at a standard cost of $14.50 per hour. Read the requirement. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Variance Direct materials cost variance Direct labor cost variance Formula (AC - SC) x AQ (AC - SC) X AQ Il ||Explanation / Answer
Direct materials cost variance
= (AC - SC) x AQ
= ($1.20-$1.25) x 145,000
= 7,250 F
Direct labor cost variance
= (AC - SC) x AQ
= ($15.50 - $14.50) x 420
= $420 U
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