Question

In: Accounting

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...

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 ? $ 4.50 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, 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* $ 9,540 $ 5,936 $ 1,484
Actual costs incurred $ 8,645 ? $ 1,690
Materials price variance ?
Materials quantity variance $ 1,575 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 795
Difference between standard and actual cost per backpack produced during March $ 0.20 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?

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

6. What was the labor rate variance for March? The labor efficiency variance?

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance?

8. Prepare a standard cost card for one backpack.

Solutions

Expert Solution

1) Standard Cost of a single backpack :

Standard cost for 530 Backpack
Particular Amount ($)
Direct material 9540
Direct labor 5936
Variable Mnaufacturing Overhead 1484
Total 16960

Standard cost of a single backpack = $ 16960 / 530

Standard cost of a single backpack = $ 32 / backpack

2) The actual cost per backpack produced during March :

Particular Amount ($)
Standard cost per backpack 32
less : Favorable variance 0.2
Actual cost per backpack 31.8

3) Yards of material required at standard per backpack :

Standard cost of material ( for 530 backpack ) = $ 9540

Standard cost of material per backpack = 9540 / 530 = $ 18

Standard Quantity = Standard cost / Standard Price

Standard Qunatity = 18 / 4.5

Yards of material required at standard per backpack = 4 yards per backpack

4) Standard cost of material = $ 9540

Actual cost of material = $ 8645

Material cost variance = Standard cost - actual cost

Material cost variance = 9540 - 8645

Material cost variance= $ 895 F

Also ,

Material cost variance = Material price variance + Material quantity variance

895 = Material price variance + ( - 1575 )

Material price variance = 895 + 1575

Material price variance = 2470 F

5) Standard Direct labor rate per hour = Standard labor cost / Direct labor hours

Standard Direct labor rate per hour can be computed using variable manufacturing overhead since overhead is applied to production on the basis of direct labor hours

Direct labor hours = Standard Variable manufacturing Overhead / Standard Rate

Direct labor hours = 1484 / 2

Direct labor hours = 742

Standard Direct labor rate per hour = $ 5936 / 742

Standard Direct labor rate per hour = $ 8 per hour

6)

Particular
Actual cost per backback 31.8
Number of backpack 530
Actual cost 16854
less : Actual material cost 8645
less : Actual variable manufactruring cost 1690 -10335
Actual labor cost ( Actual hour * Actual rate ) 6519
Actual labor hours 795
Actual rate per hour ( 6519 / 795 ) 8.2

Labor rate variance = Actual hours ( Standard rate -actual rate )

Labor rate variance = 795 ( 8 - 8.2 )

Labor rate variance = 159 U

Labor efficiency variance = Standard rate ( Standard hours - actual hours )

Labor efficiency Variance = 8 ( 742 - 795 )

Labor efficiency ratio = 424 U

7)

Actual rate for variable overhead = Actual variable overhead / Actual labor hours = 1690 / 795

Actual rate for variable overhead = 2.13 per hour

Variable overhead rate variance = Actual hours ( Standard rate - Actual rate )

Variable Overhead rate variance = 795 ( 2 - 2.13 ) = 103 U

Variable overhead efficiency variance = Standard rate ( Standard hours - Actual hours )

Variable overhead efficiency variance = 2 ( 742 - 795 )

Variable overhead efficiency variance = 106 U

8) Standard cost card for one backpack

Standard quantity Standard price Standard cost
or hours (a) or rate (b) ( a * b)
Direct material 4 yards $ 4.5 per yard 18
Direct labor 1.5 hour $ 8 per hour 12
( 795 / 530 )
Variable manufacturing overhead 1.5 hours $ 2 per hour 3
Total 33

Please hit LIKE if it was helpful


Related Solutions

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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, 400 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 per unit $ ? Overhead is applied to production on the basis of direct labor-hours. During March, 600 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 ? $ 4.00 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, 420 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 ? $ 3.00 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, 570 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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, 800 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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, 520 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 ? $ 5.00 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, 440 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 ? $ 3.00 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, 570 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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, 520 backpacks were...
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating...
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 ? $ 5.00 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, 440 backpacks were...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT