Kingbird Corporation manufactures a single product. The standard
cost per unit of product is shown below.
Direct materials—1 pound plastic at $6.00 per pound | $ 6.00 | |
Direct labor—1.5 hours at $12.20 per hour | 18.30 | |
Variable manufacturing overhead | 9.00 | |
Fixed manufacturing overhead | 15.00 | |
Total standard cost per unit | $48.30 |
The predetermined manufacturing overhead rate is $16.00 per direct
labor hour ($24.00 ÷ 1.5). It was computed from a master
manufacturing overhead budget based on normal production of 8,700
direct labor hours (5,800 units) for the month. The master budget
showed total variable costs of $52,200 ($6.00 per hour) and total
fixed overhead costs of $87,000 ($10.00 per hour). Actual costs for
October in producing 4,300 units were as follows.
Direct materials (4,500 pounds) | $ 27,900 | |
Direct labor (6,250 hours) | 77,500 | |
Variable overhead | 78,430 | |
Fixed overhead | 26,670 | |
Total manufacturing costs | $210,500 |
The purchasing department buys the quantities of raw materials that
are expected to be used in production each month. Raw materials
inventories, therefore, can be ignored.
Solution a:
Direct Material Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AQ * | AP = | AQ * | SP = | SQ * | SP = | |||||||
4500 | $6.20 | $27,900.00 | 4500 | $6.00 | $27,000.00 | 4300 | $6.00 | $25,800.00 | ||||
$900.00 | U | $1,200.00 | U | |||||||||
Direct Material Price Variance | Direct Material Qty variance | |||||||||||
Direct material price variance | $900.00 | U | ||||||||||
Direct material quantity variance | $1,200.00 | U | ||||||||||
Direct material cost variance | $2,100.00 | U |
Direct Labor Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AH * | AR = | AH * | SR = | SH * | SR = | |||||||
6250 | $12.40 | $77,500.00 | 6250 | $12.20 | $76,250.00 | 6450 | $12.20 | $78,690.00 | ||||
$1,250.00 | U | $2,440.00 | F | |||||||||
Direct Labor rate Variance | Direct Labor Efficiency Variance | |||||||||||
Direct Labor Rate variance | $1,250.00 | U | ||||||||||
Direct Labor Efficiency variance | $2,440.00 | F | ||||||||||
Direct labor cost variance | $1,190.00 | F |
Solution b:
Total overhead variance = Total overhead applied - actual overhead
= (4300*1.50*$16) - ($78,430 + $26,670)
= $1,900 U
Kingbird Corporation manufactures a single product. The standard cost per unit of product is shown below....
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