Question

Selling price is $10/tin. The cost is $8/tin This includes $6 of direct material and $1.50 of direct labor. Direct labor is 1 hour per 100 tins. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. The breakdown for manufacturing overhead includes 85% of variable costs.

d. The Controllable Variance is $3250 Unfavorable. What was the total dollar amount for actual manufacturing overhead?

e. Explain the calculation of the total standard hours allowed for actual production.

f. The Labor Quantity Variance is $300 Unfavorable. How many total actual hours were worked?

g. What is the total standard cost of direct materials for total actual production?

h. Total Material Price Variance is $16,800 Unfavorable. What was the actual direct material cost for total actual production?

Answer 1

d. Total dollar amount for actual manufacturing overhead

Budgeted Overhead	$100,000
Less: Favorable volume variance	$750
Add: Unfavorable controllable variance	$3,250
Actual Manufacturing Overhead	$102,500

e. Standard hours allowed for production

For 100 tins = 1 Hr

200,000 tins = (200,000tins / 100tins) = 2,000 hours

f. Labor quantity variance = Standard rate x (Actual hours - Standard hours)

=> 300 = 1.5 x (Actual hours - 2000)

Actual Hours = 2000 + (300/1.5) = 2,200 hours

g. Standard cost of direct materials for actual production = Standard rate x Actual units

Actual Units :

Volume variance = Fixed rate * (Actual output - Budgeted output)

Fixed rate = (15% of $100,000) / 200,000 units = $0.075

750 = 0.075 * (Actual units - 200,000)

Actual Units = 200,000 + (750/0.075) = $210,000

Standard cost of direct materials for actual production = 6 x 210,000 = $1,260,000

h. Material price variance = Actual Quantity x (Actual price - Standard price)

=>16,800 = 210,000 x (Actual price - 6)

Actual price = (16,800 / 210,000) + 6 = $6.08

Actual direct material cost = 210,000 x $6.08 = $1,276,800

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