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*	$12,720	$8,056	$1,696
Actual costs incurred	$11,100	?	$2,242
Materials price variance	?
Materials quantity variance	$ 600 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	940
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? (Input all amounts as positive values. 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.	What is the standard cost of a single backpack?

Standard cost of Material = given = $ 6 per yard

standard cost of Material = $12,720

no of yards = 12720/6 = 2120 yards

for manufacturing of 530 backpacks

so for one backpack = 2120/530 = 4 yards per backpack

4*$6= $24 standard cost of material for one backup

Standard Direct Labour Rate per yard =  

calculation of direct labour hour

variable Overhead cost Given = $ 1,696

Variable Overhead rate = $ 2 per direct Labour Hour

Therefor direct labour hour = $ 1696/ 2 = 848 hours

Direct Labout Cost = Given = $8,056

Direct Labour Hour = 848

848 hours produces 530 units

one unit requires 848/530 = 1.6 hours per backpack

Standard Direct Labour Cost per yard = $ 8056/ 848 = $9.5 per Backpack

therefore Standard cost of yard = Material + Labour+ Variable overhead

Answer    = 24+ 9.5+( 2*1.6) = $36.70 per backpack