Question

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:

	Standard Quantity or Hours	Standard Price or Rate			Standard Cost
Direct materials	?	$	6.00	per yard	$	?
Direct labor	?		?			?
Variable manufacturing overhead	?	$	2	per direct labor-hour		?
Total standard cost per unit					$	?

Overhead is applied to production on the basis of direct labor-hours. During March, 800 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:

	Materials Used			Direct Labor			Variable Manufacturing Overhead
Total standard cost allowed*	$	19,200		$	9,200		$	1,600
Actual costs incurred	$	11,100			?		$	4,740
Materials price variance		?
Materials quantity variance	$	3,000	U
Labor rate variance					?
Labor efficiency variance					?
Variable overhead rate variance								?
Variable overhead efficiency variance								?

*For the month's production.

The following additional information is available for March’s production:

Actual direct labor-hours		1,200
Difference between standard and actual cost per backpack produced during March	$	0.15	F

. What is the standard cost of a single backpack?

2. What was the actual cost per backpack produced during March?

3. How many yards of material are required at standard per backpack?

4. What was the materials price variance for March if there were no beginning or ending inventories of materials?

5. What is the standard direct labor rate per hour?

6. What was the labor rate variance for March? The labor efficiency variance?

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance?

8. Prepare a standard cost card for one backpack.

Answer 1

1)	Standard cost for September production
	Materials				19,200
	Direct labor				9,200
	Variable manufacturing overhead				1,600
	total standard cost		(a)		30,000
	number of backpacks produced			(b)	800
	standard cost of single backpack a/b				37.5	answer
2)	Standard cost of a single backpack(above)				37.5
	Deduct Fav variance between std and actual cost				-0.15
	Actual cost per backpack				37.35
3)	total standard cost of materials used (a)				19,200
	number of backpacks produced			(b)	800
	standard material cost per backpacka/b				24
	standard material cost per backpack/standard material cost per yard
	24/6	=	$4	yards per backpack
4)	standard cost of material used				19,200
	actual cost of materials used				11,100
	Total variance				8,100	F
	price variance				11,100	F
	Quantity variance				3000	U	(given)
	total variance				8,100	F
5)	Std VMOH cost				1,600
	std VMOH rate per direct labor hr				2		(given)
	Standard direct labor hours				800
	total std direct labor cost /total standard DLH's
	9,200	/	800	=	11.5	per DLH	answer
6)	Actual cost per backpack produced				37.35
	number of backpacks produced				800
	total actual cost of production					29880
	less:Actual cost of materials					-11,100
	Actual cost of variable mfg overhead					-4,740
	actual cost of direct labor					14040
	direct labor rate variance
	(AH*AR - SR*AH)
	14040 - 1200*11.5
	240	U
	Direct labor efficiency variance
	(AH-SH)*SR
	(1200 -800)*11.5
	4600	U
7)	variable overhead rate variance
	(AH*AR - SR*AH)
	4,740	-	1200*2
	2340	U
	variable overhead efficiency variance
	(AH-SH)*SR
	(1200-800)*2
	800	U
			SQ or	SP/SR	standard
8)			SH		cost
	Direct materials		$4	6	24
	Direct labor		1	11.5	11.5
	VMOH		1	2	2
	total standard cost per backpack				37.5