Pennfoil Company produces retractable pens. March budgeted production costs are

Question

Pennfoil Company produces retractable pens. March budgeted production costs are given below: Pens to be produced 100,000 Direct material (variable) $33,000 Direct Labor (variable) $48,000 Supplies (variable) $27,500 Supervision (fixed) $40,000 Depreciation (fixed) $22,000 Other (fixed) $10,000 In April, Pennfoil expects to produce 90,000 pens. Assuming no structural changes, what is Pennfoil’s budgeted production cost per pen for April?

A) $1.62 B) $1.72 C) $1.81 D) $1.89

Use the cost information in (1) above. In March, the actual direct labor costs were $46,000 and Pennfoil produced and sold 90,000 pens. The direct labor performance variance (difference) is:

A) $2,800 unfavorable. B) $5,000 unfavorable. C) $1,000 unfavorable. D) $5,000 favorable.

Explanation / Answer

The correct option is D) $ 1.89

Budgeted production cost per pen for April:

The correct answer is A) $ 2,800 unfavorable

Budgeted direct labor cost = $ 43,200

Actual direct labor cost = $ 46,000

Direct labor performance variance = $ 43,200 - $ 46,000 = $ 2,800 unfavorable

$ Direct material cost 29,700 Direct labor cost 43,200 Supplies 24,750 Supervision 40,000 Depreciation 22,000 Others 10,000 Total cost 169,650 Expected units to be produced 90,000 Budgeted production cost per unit $ 1.885

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