Question

Required information [The following information applies to the questions displayed below] A manufactured product has the following information for June. Direct materials Direct labor Overhead Units manufactured Standard (6 lbs. @ $7 per lb.) (2 hrs. $16 per hr.) (2 hrs. @ $13 per hr.) Actual 44.3e9 lbs. @ $7.10 per lb. 14,300 hrs. $16.50 per hr. $196,700 7,300 (1) Compute the standard cost per unit Direct materials Direct labor Overhead Total (2) Compute the total cost variance for June, Indicate whether the cost variance is favorable or unfavorable Total cost variance

Answer 1

Answer

• Requirement 1

Direct Materials = 6 x 7 = $ 42
Direct Labor = 2 x 16 = $ 32
Overhead = 2 x $ 13 = $ 26
Total = 42 + 32 + 26 = $ 100

• Requirement 2

>Total Standard Cost = 7300 units x $ 100 = $ 730,000
>Total Actual Cost = (44300 x 7.1) + (14300 x 16.50)+196700 = 747,180
>Total Cost Variance = 747180 – 730000 = $ 17,180 Unfavourable

• Requirement 3

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
44,300	x	$                     7.10		44,300	x	$            7.00		43,800	x	$               7.00
	$                    314,530.00				$               310,100.00				$                   306,600.00
Price Variance - Material			$                 4,430.00	Quantity Variance - Material			$                 3,500.00

Direct material Price Variance	$                 4,430.00	Unfavourable
Direct material Quantity Variance	$                 3,500.00	Unfavourable
Total Direct material Variance	$                 7,930.00	Unfavourable

• Requirement 4

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
14,300	x	$                16.50		14,300	x	$    16.00		14,600	x	$              16.00
	$          235,950.00				$     228,800.00				$           233,600.00
Rate Variance - Labor			$         7,150.00	Efficency Variance - Labor			$         4,800.00

Labor Rate Variance	$         7,150.00	Unfavourable
Labor Efficiency Variance	$         4,800.00	Favourable
Total Labor Cost [Spending] Variance	$         2,350.00	Unfavourable