Question

Walton Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles:

Amount of direct materials per candle		1.70	pounds
Price of direct materials per pound	$	0.60
Quantity of labor per unit		0.90	hours
Price of direct labor per hour	$	7.10	/hour
Total budgeted fixed overhead	$	182,400

During 2017, Walton planned to produce 32,000 drip candles. Production lagged behind expectations, and it actually produced only 25,000 drip candles. At year-end, direct materials purchased and used amounted to 43,900 pounds at a unit price of $0.56 per pound. Direct labor costs were actually $6.40 per hour and 24,900 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $150,000. Overhead is applied to products using a predetermined overhead rate based on estimated units.

Required

1. a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle.

2. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle.

3. e. Compute the price and usage variances for direct materials and direct labor.

4. f. Compute the fixed cost spending and volume variances.

Answer 1

a&b
The total standard cost per candle is equal to material cost, labor cost and overhead cost for one candle.
Calculation of standard cost per candle
Direct materials	1.70*0.60	$1.02
Direct Labor	0.90*7.10	$6.39
Overhead	182400/32000	$5.70
Total standard cost per candle		$13.11
The standard cost per candle is $13.11
c&d
The total actual cost per candle is equal to actual costs incurred for material, labor and overhead for one candle
Direct materials	(43900/25000)*0.56	$0.98
Direct Labor	(24900/25000)*6.40	$6.37
Overhead	150000/25000	$6.00
Total standard cost per candle		$13.36
The actual cost per candle is $13.36
e.
Direct material
Price variance = (Standard price - Actual price)*actual quantity used
Price variance = (0.60-0.56)*43900
Price variance	1756	F
Usage variance = (Standard quantity - Actual quantity)*Standard price
Usage variance = (42500-43900)*0.60
Usage variance	840	U
Standard quantity = 1.70*25000	42500.000
Direct Labor
Price variance = (Standard labor price - Actual labor price)*Actual labor hours used
Price variance = (7.10-6.40)*24900
Price variance	17430	F
Usage variance = (Standard labor hours - Actual labor hours)*Standard labor price
Usage variance = (22500 - 24900)*7.10
Usage variance	17040	U
Standard labor hours = 0.90*25000	22500
f.
Spending variance = (Standard fixed cost - actual fixed costs)
Spending variance = (182400-150000)
Spending variance	32400	F
Volume variance = (Applied overhead - Standard overhead)
Volume variance = ((25000*5.70) - 182400)
Volume variance	39900	U
Standard cost per unit = 182400/32000	5.70