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 ? $ 4.00 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, 700 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* $ 11,200 $ 10,500 $ 2,100
Actual costs incurred $ 8,925 ? $ 4,032
Materials price variance ?
Materials quantity variance $ 700 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 1,050
Difference between standard and actual cost per backpack produced during March $ 0.34 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 for September production
Materials 11,200
Direct labor 10,500
Variable manufacturing overhead 2,100
total standard cost (a) 23,800
number of backpacks produced (b) 700
standard cost of single backpack a/b 34 answer
2) Standard cost of a single backpack(above) 34
Deduct Fav variance between std and actual cost -0.34
Actual cost per backpack 33.66
3) total standard cost of materials used (a) 11,200
number of backpacks produced (b) 700
standard material cost per backpacka/b 16
standard material cost per backpack/standard material cost per yard
16/4 = $4 yards per backpack
4) standard cost of material used 11,200
actual cost of materials used 8,925
Total variance 2,275 F
price variance 2,975 F
Quantity variance 700 U (given)
total variance 2,275 F
5) Std VMOH cost 2,100
std VMOH rate per direct labor hr 2 (given)
Standard direct labor hours 1050
total std direct labor cost /total standard DLH's
10,500 / 1050 = 10 per DLH answer
6) Actual cost per backpack produced 33.66
number of backpacks produced 700
total actual cost of production 23562
less:Actual cost of materials -8,925
        Actual cost of variable mfg overhead -4,032
actual cost of direct labor 10605
direct labor rate variance
(AH*AR - SR*AH)
10605 - 1050*10
105 U
Direct labor efficiency variance
(AH-SH)*SR
(1050-1050)*10
0 N
7) variable overhead rate variance
(AH*AR - SR*AH)
4,032 - 1050*2
1932 U
variable overhead efficiency variance
(AH-SH)*SR
(1050-1050)*2
0 N
SQ or SP/SR standard
8) SH cost
Direct materials $4 4 16
Direct labor 1.5 10 15
VMOH 1.5 2 3
total standard cost per backpack 34

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