Question

Required information The following information applies to the questions displayed below] A manufactured product has the following information for June Standard (7 lbs. $7 per 1b.) (3 hrs.@ $15 per hr.) (3 hrs. $12 per hr.) Actual 58,600 lbs. $7.10 per 1b. 24,600 hrs. @$15.5e per hr. $ 304,100 8,300 Direct materials Direct labor Overhead Units manufactured (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

(1) Standard cost per unit is given by:

Direct materials per unit :7 lbs @ $7 per lb = $49

Direct labor per unit: 3 hrs @ $15 per hour = $45

Overhead per unit : 3 hrs @ $12 per hour = $36

Standard cost per unit = Direct material per unit + Direct labor per unit + Overhead per unit

Standard cost per unit = $49 + $45 + $36 = $130 per unit

(2) For total cost variance, we need to find the standard cost and actual cost as per below:

Standard cost = Standard cost per unit * No. of units

where, standard cost = $130 per unit (as calculated in previous step (a)), No. of units = 8300

Putting the values in the above equation, we get,

Standard cost = $130 * 8300 = $1079000

Calculation of actual cost:

Direct materials: 58600 lbs @ $7.10 per lb = $416060

Direct labor: 24600 hrs @ $15.50 per hour = $381300

Overhead: $304100

Actual cost = Direct material + Direct labor + Overhead

Actual cost = $416060 + $381300 + $304100 = $1101460

Now, we will calculate total cost variance as below:

Total cost variance = Standard cost - Actual cost

Putting the values in the above equation, we get,

Total cost variance = $1079000 - $1101460 = - $22460

Since the variance is negative, so it is an unfavorable variance.