Question

Case 10-17 Working Backwards from Variance Data [LO10-1, LO10-2, LO10-3]

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

Inputs	(1) Standard Quantity or Hours		(2) Standard Price or Rate			Standard Cost (1) × (2)
Direct materials	2.20	pounds	$	16.30	per pound	$	35.86
Direct labor	1.00	hours	$	15.60	per hour	$	15.60
Variable manufacturing overhead	1.00	hours	$	9.30	per hour	$	9.30
Total standard cost per unit						$	60.76

	Total		Variances Reported
	Standard Cost*		Price or Rate			Quantity or Efficiency
Direct materials	$	573,760	$	10,788	F	$	32,600	U
Direct labor	$	249,600	$	3,400	U	$	15,600	U
Variable manufacturing overhead	$	148,800	$	4,200	F	$	?†	U

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

1. How many units were produced last period?

2. How many pounds of direct material were purchased and used in production?

3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Answer 1

Solution 1:

Nos of units produced = Standard cost of material / Standard cost per unit of material = $573,760 / $35.86 = 16000 units

Solution 2:

Standard quantity of material for actual production = 16000 * 2.20 = 35200 pounds

Direct material quantity variance = $32,600 U

(SQ - AQ) * SP = -$32,600

(35200 - AQ) * $16.30 = -$32,600

Actual quantity of material purchased and used = 37200 pound

Solution 3:

Direct material price variance = $10,788 F

(SP - AP) * AQ = $10,788

($16.30 - AP) * 37200 = $10,788

Actual price = $16.01 per pound

Solution 4:

Standard direct labor hours = 16000 * 1 = 16000 hours

direct labor efficiency variance = (SH - AH) * SR = $15,600 U

(16000 - AH)* $15.60 = -$15,600

Actual hours = 17000 hours

Solution 5:

Direct labor rate variance = $3,400 U

(SR - AR) * AH = -$4,000

($15.60 - AR) * 17000 = -$3,400

Actual rate of labor = $15.80 per hour

Solution 6:

Variable manufacturing overhead efficiency variance = (SH - AH) * SR = (16000 - 17000) * $9,30 = $9,300 U

Actual variable manufacturing overhead = Standard variable overhead - Favorable variable overhead rate variance + Unfavorable variable overhead efficiency variance

= $148,800 - $4,200 + $9,300 = $153,900