Question

Baird Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.60 pounds $ 0.50 0.80 hours $ 7.40/hour $124, 200 During 2017, Baird planned to produce 27,000 drip candles. Production lagged behind expectations, and it actually produced only 20,000 drip candles. At year-end, direct materials purchased and used amounted to 33,000 pounds at a unit price of $0.44 per pound, Direct labor costs were actually $6.90 per hour and 18,500 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $96,000. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor 1. Compute the fixed cost spending and volume variances.

Answer 1

A & B :

	Standard Cost per Unit
Direct Materials	$ 0.80
Direct Labor	5.92
Overhead	4.60
Total Cost per Candle	$ 11.32

C & D :

	Actual Cost per Unit
Direct Materials	$ 0.73
Direct Labor	6.38
Overhead	4.80
Total Cost per Unit	$ 11.91

E. :

	Variance
Direct Materials
Price Variance	$ 1,980	F
Usage Variance	500	U
Direct Labor
Price Variance	$ 9,250	F
Usage Variance	18,500	U

F.

Fixed MOH Cost	Variance
Spending Variance	$ 28,200	F
Volume Variance	32,200	U

Computations:

Direct materials price variance = $ ( 0.50 - 0.44 ) x 33,000 pounds = $ 1,980 F

Direct materials usage variance = ( 20,000 x 1.60 - 33,000) x $ 0.50 = $ 500 U

Direct labor price variance = $ ( 7.40 - 6.90 ) x 18,500 hours = $ 9,250 F

Direct labor usage variance = ( 20,000 x 0.80 - 18,500) x $ 7.40 = $ 18,500 U