Question

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A manufactured product has the following information for June.

	Standard	Actual
Direct materials	6 lbs. @ $7 per lb.		49,000	lbs. @ $7.20 per lb.
Direct labor	3 hrs. @ $16 per hr.		24,000	hrs. @ $16.50 per hr.
Overhead	3 hrs. @ $12 per hr.	$	298,000
Units manufactured			8,100

(1) Compute the standard cost per unit.
(2) Compute the total cost variance for June.

Answer 1

Ans. 1	Particulars	Per unit
	Direct materials (6 ibs. * $7 per ib.)	$42
	Direct Labor (3 hrs. * $16 per hr.)	$48
	Overhead (3 hrs. * $12 per hr.)	$36
	Total Standard Cost per unit	$126	per unit
Ans. 2	*Calculations for Budgeted manufacturing cost :
	Budgeted manufacturing cost = Units manufactured * Total standard cost per unit
	8,100 * $126
	$1,020,600
	*Calculations for Actual manufacturing cost :
	Direct materials (49,000* $7.20)	$352,800
	Direct Labor (24,000 * $16.50)	$396,000
	Overhead cost (given)	$298,000
	Total Actual Cost	$1,046,800
	*Calculations for total cost variance :
	Total cost variance = Total budgeted cost - Total actual cost
	$1,020,600 - $1,046,800
	-$26,200	(or   $26,200   unfavorable)