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, 760 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* $ 18,240 $ 15,808 $ 2,432 Actual costs incurred $ 17,125 ? $ 4,345 Materials price variance ? Materials quantity variance $ 2,310 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 1,140 Difference between standard and actual cost per backpack produced during March $ 0.10 F Required: Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements. 1. 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?

Answer 1

1.Standard costs of a single backpack = $48

2.Actual Costs of a single backpack = $ 48-.1= $ 47.9

3. Yards of material required at standard per backpack : 3425 Yards

4. Material Price variance = 3425 (F) Standard Quantity Standard Price Standard or Hours or Rate Cost Direct materials 4 $ 6 per yard $ 24 Direct labor 1.6           13 per direct labor-hour 20.8 Variable manufacturing overhead 1.6 $ 2 per direct labor-hour 3.2 Total standard cost per unit $ 48

Standard labour hours = 2432/2/760= 1.6 hours per unit

Standard labour Rate = 15808/1216= $ 13/hour

Standard direct material per unit = 18240/760/6= 4

Yard of material required = (18240+2310)/6 = 3425

Material price variance =3425*6-17125 = 3425 F

	Materials			Direct Labor			Variable
	Used						Manufacturing
							Overhead
Total standard cost allowed*	$	18,240		$	15,808		$	2,432
Actual costs incurred	$	17,125			14,934		$	4,345