Question

You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study.

    

On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information:

Standard Cost Card
Direct materials, 2.50 pounds at $16.50 per pound	$	41.25
Direct labor, 1.00 direct labor-hours at $15.50 per direct labor-hour	$	15.50
Variable manufacturing overhead, 1.00 direct labor-hours at $9.30 per direct labor-hour	$	9.30

	Total Standard Cost*		Variances Reported
			Price or Rate			Quantity or Efficiency
Direct materials	$	783,750	$	14,355	F	$	33,000	U
Direct labor	$	294,500	$	4,000	U	$	15,500	U
Variable manufacturing overhead	$	176,700	$	4,900	F	$	? †	U

^*Applied to Work in Process during the period.

^† Entry obliterated.

You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

It is now 8:30 a.m. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary “backup” data for the variances before the meeting begins. Without backup data it will be impossible to lead the discussion or answer any questions..

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

1	How many units were produced last period?
	Total Standard cost
	Direct material	$783,750
	Direct labor	$294,500
	Variable manufactruing overhead	$176,700
	Total Standard cost	$1,254,950
	Standard cost per unit
	Direct material	$41.25
	Direct labor	$15.50
	Variable manufactruing overhead	$9.30
	Standard cost per unit	$66.05
	Units produced (Total standard cost/per unit cost)	19000
2	How many pounds of direct material were purchased and used in production
	Standard cost of direct material used	$783,750
	Add: Quantity variance	$33,000
	Actual quantity of material purchased at standard cost	$816,750
	Standard cost per pound	$16.50
	Actual quantity of material purchased and used	49500
3	What was the actual cost per pound of material?
	Actual quantity at standard cost	$816,750
	Less: Price variance	$14,355
	Actual quantity at actual cost	$802,395
	Actual quantity	49500
	Actual cost per pound	$16.21
4	How many actual direct labor hours were worked during the period?
	Standard cost of direct labor	$294,500
	Add: Efficiency variance	$15,500
	Actual direct labor hours at standard cost	$310,000
	Standard direct labor cost per hour	$15.50
	Actual direct labor hours worked	20000
5	What was the actual rate paid per direct labor hour?
	Actual direct labor hours at standard cost	$310,000
	Add: Price variance	$4,000
	Actual direct labor hours at actual rate	$314,000
	Actual direct labor hours worked	20000
	Actual rate per labor hour	$15.70
6	How much actual variable manufacturing overhead cost was incurred
	during the period
	Actual hours at standard rate (20000 x $9.30) $186,000 Less: Rate variance $4,900 Actual hours at actual rate $181,100 Variable overhead Efficiency Variance Actual hour at standard rate 20000 hrs x $9.30 per hr $186,000 Standard hour at standard rate 19000 hrs x $9.30 per hr $176,700 Efficiency Variance $9,300 Unfavourable Actual Variable overhead cost incurred $181,100