Question

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	?	$6.00 per yard	$?
Direct labor	?	?	?
Variable manufacturing overhead	?	$2 per direct labor-hour	?
Total standard cost			$?

Overhead is applied to production on the basis of direct labor-hours. During March, 530 backpacks were manufactured and sold. Selected information relating to the month's production is given below: 

	Materials Used	Direct Labor	Variable Manufacturing Overhead
Total standard cost allowed ^(**)	$15,900	$7,420	$1,484
Actual costs incurred	$13,750	?	$1,708
Materials price variance	?
Materials quantity variance	$600U
Labor rate variance		?
Labor efficiency variance
Variable overhead rate variance
Variable overhead efficiency variance

*For the month's production. 

The following additional information is available for March's production: 

Actual direct labor-hours 880

Difference between standard and actual cost per backpack produced during March $0.20 F

Required:

 1. What is the standard cost of a single backpack?

 2. What was the actual cost per backpack produced during March? 

 3. How many yards of material are required at standard per backpack? 

 4. What was the materials price variance for March if there were no beginning or ending inventories of materials? 

 5. What is the standard direct labor rate per hour? 

 6. What was the labor rate variance for March? The labor efficiency variance?

 7. What was the variable overhead rate variance for March? The variable overhead efficiency variance?

 8. Prepare a standard cost card for one backpack. 

Answer 1

1)	Standard cost for September production
	Materials				15,900
	Direct labor				7,420
	Variable manufacturing overhead				1,484
	total standard cost		(a)		24,804
	number of backpacks produced			(b)	530
	standard cost of single backpack a/b				46.8	answer
2)	Standard cost of a single backpack(above)				46.8
	Deduct Fav variance between std and actual cost				-0.2
	Actual cost per backpack				46.6
3)	total standard cost of materials used (a)				15,900
	number of backpacks produced			(b)	530
	standard material cost per backpacka/b				30
	standard material cost per backpack/standard material cost per yard
	30/6	=	$5	yards per backpack
4)	standard cost of material used				15,900
	actual cost of materials used				13,750
	Total variance				2,150	F
	price variance				2,750	F
	Quantity variance				600	U	(given)
	total variance				2,150	F
5)	Std VMOH cost				1,484
	std VMOH rate per direct labor hr				2		(given)
	Standard direct labor hours				742
	total std direct labor cost /total standard DLH's
	7,420	/	742	=	10	per DLH	answer
6)	Actual cost per backpack produced				46.6
	number of backpacks produced				530
	total actual cost of production					24698
	less:Actual cost of materials					-13,750
	Actual cost of variable mfg overhead					-1,708
	actual cost of direct labor					9240
	direct labor rate variance
	(AH*AR - SR*AH)
	9240 - 880*10
	440	U
	Direct labor efficiency variance
	(AH-SH)*SR
	(880- 742*10
	1380	U
7)	variable overhead rate variance
	(AH*AR - SR*AH)
	1,708	-	880*2
	52	F
	variable overhead efficiency variance
	(AH-SH)*SR
	(880-742)*2
	276	U
			SQ or	SP/SR	standard
8)			SH		cost
	Direct materials		$5	6	30
	Direct labor		1.4	10	14
	VMOH		1.4	2	2.8
	total standard cost per backpack				46.8