Question

Landers Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May

   Standard cost per unit Actual costs used in production of 12,000 units

Direct materials 1.80 feet at $3.00 per foot 24,000 feet purchased at a total cost of $69,900,

used only 21,000 feet in production

Direct labor    0.90 hours at $18.00 per hour   11,400 hours at $17.40 per hour

Variable overhead 0.90 hours at $5.00 per hour   11,400 hours at a total cost of $62,600

Required: 1. Compute the total standard cost per unit and total actual cost per unit. How much is the difference between the actual unit costs and the standard cost?

2. Compute the following variances for May:

a. Materials quantity and price variances.

b. Labor efficiency and rate variances.

c. Variable overhead efficiency and rate variances.

3. Discuss the main reasons for the difference between the actual unit costs and the standard cost you computed in (1).

Answer 1