Problem 23-1A Costello Corporation manufactures a single product. The standard c

Question

Problem 23-1A Costello Corporation manufactures a single product. The standard cost per unit of product is shown below Direct materials-1 pound plastic at $6.33 per pound Direct labor-2.50 hours at $11.00 per hour Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit 6.33 27.50 13.75 16.25 $63.83 The predetermined manufacturing overhead rate is $12 per direct labor hour ($30.00 ÷ 2.50). It was computed from a master manufacturing overhead budget based on normal production of 14,000 direct labor hours (5,600 units) for the month. The master budget showed total variable costs of $77,000 ($5.50 per hour) and total fixed overhead costs of $91,000 ($6.50 per hour). Actual costs for October in producing 4,000 units were as follows Direct materials (4,140 pounds) Direct labor (9,880 hours) Variable overhead Fixed overhead 26,827 110,952 87,118 34,922 $259,819 Total manufacturing costs The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore can be ignored

Explanation / Answer

Standard data per unit:

Direct material 1 pound plastic at $6.33 per pound

Direct labor : 2.5 hours lat $11 per hour

Actual data per unit:

Direct material 4140/4000 = 1.035 pound plastic at $26827/4140 = 6.48 per pound

Direct labor : 9880/4000 = 2.47 hours lat $110952/9880 = 11.23 per hour

Total materials variance = 26827 - (6.33*4000) = 26827 - 25320 = 1507 (Unfavourable)

Materials price variance = (6.33 - 6.48)*4140 = 621 (Unfavourable)

Materials quantity variance = (4140 -4000)*6.33 = 886 (Unfavourable)

Total labor variance = 110952 - (27.50*4000) = 110952 - 110000 = 952 (Unfavourable)

Labor price variance = (11 - 11.23)*9880 = 2272 (Unfavourable)

Labor quantity variance = (2.50 - 2.47)*4000*11 = 1320 (Favourable)

Total overhead variance = (13.75+16.25)*4000 - (87118+34922) = 120000 - 122040 = 40 (Unfavourable)

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