Question

A manufactured product has the following information for August.

	Standard		Actual
Direct materials	2 lbs. per unit @ $3.50 per lb.
Direct labor	0.5 hours per unit @ $24 per hour
Overhead	$24 per direct labor hour
Units manufactured				12,400
Total manufacturing costs			$	380,400

(1) Compute the standard cost per unit.
(2) Compute the total budgeted cost for production in August.
(3) Compute the total cost variance for August. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance)

A manufactured product has the following information for August.

	Standard		Actual
Direct materials	2 lbs. per unit @ $3.50 per lb.
Direct labor	0.5 hours per unit @ $24 per hour
Overhead	$24 per direct labor hour
Units manufactured				12,400
Total manufacturing costs			$	380,400

(1) Compute the standard cost per unit.
(2) Compute the total budgeted cost for production in August.
(3) Compute the total cost variance for August. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance)

Direct materials
Direct labor
Overhead
Total

*Total budgeted cost

Cost variance

Answer 1

1)   Compute the standard cost per unit.

Direct materials (2lbs x $3.50)	$7.00
Direct labor (0.5 hours x $24)	$12.00
Overhead (0.5 hours x $24)	$12.00
standard cost per unit	$31.00

(2) Total budgeted cost = standard cost per unit x Units Produced
                                              = $31.00 x 12,400 units
                                   = $384,400

(3) Total cost variance =   Standard (Budgeted ) cost - Actual Cost
                                    =   $384,400 - $380,400
                                    = $4,000 Favorable