Question

Pato Company produces leather sandals. The company employs a standard costing
system and has the following standards in order to produce one pair of sandals:

                    standard quantity              standard price
direct materials     2 leather strips              ?? per strip
direct labor         2.5 hours                     $12 per hour
variable overhead    2.5 hours                     ?? per hour

During May, Pato purchased leather strips at a total cost of $124,250 and had
direct labor totaling $171,100. During May, Pato used 13,600 leather strips in
the production of sandals. Pato had no beginning inventories of any type for
May. At May 31, Pato had 600 leather strips remaining in its direct materials
inventory.

Pato Company reported the following variances for May:

  Direct material price variance ..............  $7,100 favorable
  Direct labor rate variance ..................  $29,500 unfavorable
  Total direct labor variance .................  $8,900 favorable
  Variable overhead spending variance .........  $2,440 favorable
  Variable overhead efficiency variance .......  $34,560 favorable

Calculate the actual variable overhead cost incurred by Pato Company in May.

Answer 1

Production Costs:	Standard Qty	Standard Price	Total
Direct Material	2.00	9.27	18.54			DM Price Variance	7100
Direct Labor	2.50	12.00	30.00			(SP-AP)Actual Qty	7100
Variable FOH	2.50	10.80	27.00			(SP-8.75)*13600	7100
		Total	75.54			13600SP-119000	7100
						13600SP	126100
Actual Units	6000					SP	9.27
Production Costs:	Standard Qty	Standard Price	Total			DL Price Variance	-29500
Direct Material	12,000	9.27	1,11,265			(SP-AP)Actual Hours	-29500
Direct Labor	15,000	12.00	1,80,000			(12-AP)AH	-29500
Variable FOH	15,000	10.80	1,62,000			(12AH)-(AP*AH)	-29500
		Total	4,53,265			(12AH)-(171100)	-29500
						12AH	141600
						AH	11800
Production Costs:	Actual Qty	Actual Price	Total
Direct Material	13,600	8.75	1,19,000
Direct Labor	11,800	14.50	1,71,100			Total DL Variance	8900
Variable FOH	11,800	10.59	1,25,000			(Standard Cost-Actual Cost)	8900
		Total	4,15,100			(Standard Cost-171100)	8900
						(30*Actual Units)-171100)	8900
						(30*Actual Units)	180000
						Actual Units	6000
Direct Material Used	13,600
Closing Material	600
Total	14,200					Variable OH Spending Variance	2440
						(SP-AP)Actual Hours	2440
Material Purchased	124250					(10.80-AP)11800	2440
						127440-11800AP	2440
Per Unit Cost	8.75					125000	11800AP
						AP	10.59
						Variable OH Efficiency Variance	34560
						(SQ-AQ)Standard Price	34560
						(15000-11800)SP	34560
						3200SP	34560
						SP	10.80