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 ? $5.40 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, 810 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* $17,496 $17,496 $2,592
Actual costs incurred $14,784 ? $3,679
Materials price variance ?
Materials quantity variance $648U
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 1,400
Difference between standard and actual cost per backpack produced during March $0.10 F

Required:

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? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

5. What is the standard direct labor rate per hour?

6. What was the labor rate variance for March? The labor efficiency variance? (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

8. Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places.)

Answer 1

1.

Standard cost for March Production
Material	$17,496
Add: Direct labor	$17,496
Add: Variable manufacturing overhead	$2,592
Total standard cost	$37,584
÷Number of backpack produced	810
Standard cost of a single backpack	$46.40

2.

Standard cost of a single back pack	$46.40
Less: difference between standard cost and actual cost	0.10
Actual cost per back pack	$46.30

3.

Total standard cost of material allowed during March	$ 17,496
÷No. of back packs produced during March	810
Standard material cost per backpack	$        21.60
÷Standard material cost per yard	$          5.40
No. of yard per backpack	4

4.

Direct material price variance = (Actual price – Standard price) x Actual quantity

                                           = Actual price x Actual quantity - Standard price x Actual quantity

                                           = $ 14,784 - $ 17,496 = - $ 2,712     F

****Answered first four questions.