In: Accounting
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 |
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Direct materials | ? | $ | 3.00 | 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, 570 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:
Materials Used |
Direct Labor | Variable Manufacturing Overhead |
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Total standard cost allowed* | $ | 8,550 | $ | 6,384 | $ | 1,596 | |||
Actual costs incurred | $ | 6,080 | ? | $ | 2,812 | ||||
Materials price variance | ? | ||||||||
Materials quantity variance | $ | 570 | 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 | 855 | |||
Difference between standard and actual cost per backpack produced during March | $ | 0.20 | 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.
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). Input all amounts as positive values.)
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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). Input all amounts as positive values.)
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Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places.)
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1) | Standard cost for September production | ||||||
Materials | 8,550 | ||||||
Direct labor | 6,384 | ||||||
Variable manufacturing overhead | 1,596 | ||||||
total standard cost | (a) | 16,530 | |||||
number of backpacks produced | (b) | 570 | |||||
standard cost of single backpack a/b | 29 | answer | |||||
2) | Standard cost of a single backpack(above) | 29 | |||||
Deduct Fav variance between std and actual cost | -0.2 | ||||||
Actual cost per backpack | 28.8 | ||||||
3) | total standard cost of materials used (a) | 8,550 | |||||
number of backpacks produced | (b) | 570 | |||||
standard material cost per backpacka/b | 15 | ||||||
standard material cost per backpack/standard material cost per yard | |||||||
15/3= | = | $5 | yards per backpack | ||||
4) | standard cost of material used | 8,550 | |||||
actual cost of materials used | 6,080 | ||||||
Total variance | 2,470 | F | |||||
price variance | 3,040 | F | |||||
Quantity variance | 570 | U | (given) | ||||
total variance | 2,470 | F | |||||
5) | Std VMOH cost | 1,596 | |||||
std VMOH rate per direct labor hr | 2 | (given) | |||||
Standard direct labor hours | 798 | ||||||
total std direct labor cost /total standard DLH's | |||||||
6,384 | / | 798 | = | 8 | per DLH | answer | |
6) | Actual cost per backpack produced | 28.8 | |||||
number of backpacks produced | 570 | ||||||
total actual cost of production | 16416 | ||||||
less:Actual cost of materials | -6,080 | ||||||
Actual cost of variable mfg overhead | -3,460 | ||||||
actual cost of direct labor | 6876 | ||||||
direct labor rate variance | |||||||
(AH*AR - SR*AH) | |||||||
6876 - 8*855 | |||||||
36 | U | ||||||
Direct labor efficiency variance | |||||||
(AH-SH)*SR | |||||||
(855 - 798)*8 | |||||||
456 | U | ||||||
7) | variable overhead rate variance | ||||||
(AH*AR - SR*AH) | |||||||
3,460 | - | 855*2 | |||||
1750 | U | ||||||
variable overhead efficiency variance | |||||||
(AH-SH)*SR | |||||||
(855-798)*2 | |||||||
114 | U | ||||||
SQ or | SP/SR | standard | |||||
8) | SH | cost | |||||
Direct materials | $5 | 3 | 15 | ||||
Direct labor | 1.4 | 8 | 11.2 | ||||
VMOH | 1.4 | 2 | 2.8 | ||||
total standard cost per backpack | 29 | ||||||