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	?	$8.00 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, 600 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*	$15,360	$9,000	$1,800
Actual costs incurred	$14,210	?	$2,033
Materials price variance	?
Materials quantity variance	$880U
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	970
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?

	Standard cost for March production: Materials Direct labor Variable manufacturing overhead Total standard cost $0 Number of backpacks produced Standard cost of a single backpack 0

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

	Standard cost of a single backpack Deduct difference between standard and actual cost Actual cost per backpack $0.00

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

	Total standard cost of materials allowed during March Number of backpacks produced during March Standard materials cost per backpack Standard materials cost per yard Number of yards 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).)

	Materials price variance Materials quantity variance Spending variance $0

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

	Standard variable manufacturing overhead cost for March Standard variable manufacturing overhead rate per direct labor-hour Standard direct labor-hours for March Standard direct labor cost for March    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))

	Labor rate variance Labor efficiency 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))

	Variable overhead rate variance Variable overhead efficiency variance

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

	Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials yards    $8.00 per yard Direct labor hours per hour Variable manufacturing overhead hours $2.00 per direct labor-hour Total standard cost $0.00

Answer 1

Highland Company
Part 1
Standard cost for March prod.
Materials	15360
Direct labour	9000
Variable Mfg. OH	1800
Total Std. cost	26160
No. of Backpacks produced	600
Std. cost of a single backpack	43.6
Part 2
Standard cost of a single backpack	43.6
less:- Difference	-0.2
Actual cost per backpack	43.4
Part 3
Total Std. cost of materials ( a)	15360
No. of Backpacks produced (b)	600
Std. Mat. Cost per backpack ( a/b) ( c )	25.6
Std. Mate. Cost per yard (d)	8
NO. of yards per backpack (c/d )	3.2
Part 4
MPV ( balancing figure ) (1150 + 880 )	2030	(F)
MQV	880	(U)
Spending variance ( 15360 - 14210 )	1150	(F)
Part 5
Std. var. Mfg. oH (a)	1800
Std. var. Mfg. oH per DLH (b)	2
Std. DLH ( a/b) ( c )	900
Std. direct labour cost (d)	9000
Std. DL rate per hour (d / c)	10
Part 6
LRV (balancing figure ) ( 797 - 700 )	97	(U)
LEV ( Std. hours allowed for actual production - Actual hours) * SR
( 900 - 970 ) * 10	700	(U)
Spending variance ( 9000 - 9797 ) [ for 9797 see working note below ]	797	(U)
Working notes
Actual cost for March prod.
Materials	14210
Direct labour ( balancing figure )	9797
Variable Mfg. OH	2033
Total Actual cost ( 43.4 * 600)	26040
No. of Backpacks produced	600
Actual cost of a single backpack	43.4
Part 7
VOH rate variance (balancing figure ) ( 233 - 140 )	93	(U)
VOH efficiency variance:- ( Std. hours allowed for actual production - Actual hours) * SR
( 900 - 970 ) * 2	140	(U)
Spending variance ( 1800 - 2033 )	233	(U)
Part 8 - Standard cost card	Std. qty. or hours	SP or SR	Std. cost
Direct materials	3.2 yards	8	25.6
Direct labour	1.5 DLH	10	15
VOH	1.5 DLH	2	3
Total standard cost	( 900 / 600 = 1.5 )		43.6