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	?	$4.5 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, 525 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*	$9,450	$5,880	$1,470
Actual costs incurred	$7,700	?	$1,650
Direct materials price variance	?
Direct materials quantity variance	$450 U
Direct labor rate variance		?
Direct 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	900
Standard overhead rate per direct labor-hour	$3.9
Standard price of one yard of materials	$7.8
Difference between standard and actual cost per backpack produced during March	$.20	F

Requirement 1:

a)What is the standard cost of a single backpack? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Standard cost for March Production:           Materials                                          ___________           Direct Labor                                     __________           Variable manuf overhead               ___________           Total standard cost             Number of backpacks produced    __________            Standard cost of a single backpack __________

b)What was the actual cost per backpack produced during March? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Standard cost of a single backpack                            _________

Deduct difference between standard and actual cost _________

Actual cost per backpack                                            _________

c)How many yards of material are required at standard per backpack? (Round your answer to 2 decimal places.) 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                                     _________

d)What was the direct materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)

Materials price variance      __________    ___________

Materials quantity variance __________     __________

Spending bariance               _________      __________

Requirement 2:

What is the standard direct labor rate per hour? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

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                                                      ___________

Requirement 3:

What was the direct labor rate variance for March? The direct labor efficiency variance? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)

Labor rate variance            ___________        ____________
Labor efficiency variance   ___________        ____________

Requirement 4:

What was the variable overhead rate variance for March? The variable overhead efficiency variance?(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)

Variable overhead rate variance           ___________        ____________
Variable overhead Efficiency variance ___________        ____________

Requirement 5:

Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	____________yards	4.5 per yard	$__________
Direct labor	_____________ours	$__ per hour	__________
Variable manufacturing overhead	____________hours	2.0 per hour	__________
Total standard cost			$_________

Answer 1

(1a) Standard cost of Single Backpack :-   

Material (9450/525)	18
Labour (5880/525)	11.2
Variable O/H (1470/525)	2.8
Standard cost of Single Backpack	32

(1b) Actual cost of Single Backpack :-           

   Difference between standard and actual cost per backpack produced during March = 0.20 (F)

Actual cost of Single Backpack = 32 – 0.20 = 31.80

(1c) Yards of material are required at standard per backpack :-

   

Total standard cost of materials allowed during March	9450
Number of backpacks produced during March	525
Standard materials cost per backpack	(9450/4.5) =2100
Standard materials cost per yard	4.5
Number of yards per backpack	(2100/525) =4

(1d) DM Variances:-

DM Price Variance	2200 (F)
DM Quantity Variance	450 (U)
DM Spending variance	1750 (F)

Direct Material Spending Variance :-

       = Std cost – Actual cost

                     = 9450 – 7700= 1750(F)

     Material Qty Variance = 450(U)

Material Cost Variance = Material Price Variance + Material Qty Variance

                    1750(F) = MPV + 450(U)

   MPV = 2200 (F)

(2)

Standard variable manufacturing overhead cost for March (A)	1470
Standard variable manufacturing overhead rate per direct labor-hour (B)	2
Standard direct labor-hours for March (C=A/B)	735 hrs
Standard direct labor cost for March (D)	5880
Standard direct labor rate per hour (D/C)	$ 8 per hour

(3)

Direct Labour Rate Variance	144(U)
Direct Labour Efficiency Variance	1320(U)

Labour Rate Variance :-

        (Std Rate – Actual Rate) * Actual hrs

Actual Total cost per Back Pack = 31.80

Actual total cost of 525 Back pack – 525*31.80= 16695

Actual Labour cost = Actual total cost – Actual Material cost – Actual variable cost

                         = 16695 – 7700– 1650= 7345

Actual Rate per hr = 7345/900 hrs = 8.16

=( Std Rate – Actual Rate) * Actual hrs

=(8 – 8.16) * 900= 144(U)

Labour Efficiency Variance:-

(Std hrs – Actual hrs) * SR

(735 – 900) * 8 = 1320(U)

Actual cost of Single Backpack :-           

   Difference between standard and actual cost per backpack produced during March = 0.20 (F)

Actual cost of Single Backpack = 32 – 0.20 = 31.80

(4)

V. O/H Rate Variance	150(F)
V. O/H Efficiency Variance	330(U)

Variable O/H Rate Variance :-

                 (Std Rate – Actual Rate) * Actual hrs

Std Rate = 2 per hr

Actual rate = 1650 / 900 hrs = 1.83

=(2 – 1.83) * 900 = 150(F)

V. O/H Efficiency Variance:-

(Std hrs – Actual hrs) * SR

(735 – 900) * 2= 330(U)

(5) Std Cost card:-

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	4 yards	4.5 per yard	$ 18
Direct labor	1.4 hours	$8per hour	$ 11.2
Variable manufacturing overhead	1.4 hours	2.0 per hour	$ 2.8
Total standard cost			$ 32