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			$?

Overhead is applied to production on the basis of direct labor-hours. During March, 530 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*	$15,900	$7,420	$1,484
Actual costs incurred	$13,750	?	$1,708
Materials price variance	?
Materials quantity variance	$600U
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	880
Difference between standard and actual cost per backpack produced during March	$0.20	F

Required:

1. What is the standard cost of a single backpack?

2. What was the actual cost per backpack produced during March? (Round your answers to 2 decimal places.)

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? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

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

6. What was the labor rate variance for March? The labor efficiency variance? (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

8. Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places.)

Answer 1

Answer:-

1.

Computation of Standard cost of a Single Backpack
Standard cost for March Production
Materials	$15,900
Direct Labor	$7,420
Variable Manufacturing Overhead	$1,484
Total Standard Cost	$24,804
Number of Backpacks Produced	530
Standard cost of a single Backpack	$47

2.

Computation of Actual cost per Backpack
Standard cost of a single Backpack	$47
Less: Difference Between Standard and actual Cost	$0.20
Actual Cost per Backpack	$46.8

3.

Computation of Number of yards at standard per Backpack
Total Standard cost of materials allowed during march	$15,900
Number of Backpacks Produced during march	530
Standard material cost per Backpack	$30.00
Standard material cost per yard	$6.00
Number of yards per Backpack	5

Material price variance = Total material variance - Material quantity variance

Total material cost variance = $15900 - $13,750= $2,150 F

Material quantity variance = $600 U

Material price variance = $2,150 F - ($700 U) = $2,850 F

Computation of standard Direct labor rate per hour
Standard Variable manufacturing overhead cost	$1,484
Standard Variable manufacturing overhead rate per hour	$2
Standard Direct labor hours for March	742
Standard Direct labor Cost for march	$7,420
Standard direct labor rate per hour	$10.00

Total actual cost of backpack produced = 600* $46.8 = $28080

Direct labor cost incurred = $24,804 - $13,750 - $1,708 = $9346

Actual direct labor hours = 880 hours

Actual rate of Direct labor = $9346/880 = $10.62 per hour

Direct labor rate variance = (SR - AR) * AH = ($10.00 - $10.62) *880 = $545.6 U

Direct labor efficiency variance = (SH - AH) * SR = (742- 880) * $10= 1380U

Actual rate of variable overhead = $1078/742 = $1.45 per hour

Variable overhead rate variance = (SR - AR) * AH = ($2 $1.45) *880 = $484F

Variable overhead efficiency variance = (SH - AH) * SR = (742 - 880) * $2 = $276 U

Solution 8:
Standard cost Card - Highland Company
	Standard Quantity or Hours	Standard price or rate	Standard Cost
Direct material	4	yards	6	Per Yard	$24. 0.00
Direct labor	1.5	hours	10	Per DLH	$15. 0.00
Variable overhead	1.5	hours	2	Per DLH	$3.   0.00
Standard cost per unit					$42. 0.00