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 $6.00 per yard Standard Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit per direct labor 2 hour $ Overhead is applied to production on the basis of direct labor-hours. During March, 400 backpacks were manufactured and sold Selected information relating to the month's production is given below: Materials Used $ 9,120 $ 5,520 Direct Labor $5,040 Variable Manufacturing Overhead $90 $2,620 Total standard cost allowed Actual costs incurred Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Variable overhead rate wariance Variable overhead efficiency variance $ 1,920 U For the month's production The following additional information is available for March's production: Actual direct labor-hours Difference between standard and actual cost per backpack produced during Harch 600 Required: Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements 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?

Answer 1

Material Cost Variances SQ*SR 9120 *$6) AQ*SR 11040 L *$6) AQ*AR 5520 (9120/6) 1520 SQ Units SQ per bagpack 400 (1520/400) SR $ $ 3.8 6.00 22.80 Standard Material cost per bagpack (3.8*$6) 1920 U Material Quantity Variance (SQ*SR)-(AQ*SR) = -1920 9120-(AQ*6) = -1920 AQ*6 = 9120+1920 AQ*6 = 11040 AQ = 1840 Variable OH Cost Variances SH*SRL 960 (480*$2) AH*SRL 1200 (600*$2) 2620 L 960 480 400 Standard cost allowed Standard rate Standard hours (960/2) Units Standard hours per bagpack (480/400) Standard rate per hr Standard Direct Variable OH cost per bagpack (1.20*$2) 1.20 $ 2.40

Labor Cost Variances AH*SR AH*AR SH*SR 5040 L*$_) (600*$__) $ Standard cost allowed Standard hours Standard rate (5040/480) 5,040 480 10.50 $ Standard hours per bagpack Standard rate per hr Standard Direct Labor cost per bagpack (1.20*$10.50) $ $ 1.20 10.50 12.60 Requirement 1 $ Standard Direct Material cost Standard Direct Labor cost Standard Variable OH cost Standard cost of a single bagpack 22.80 12.60 2.40 37.80 $ Requirement 2 $ 37.80 Standard cost of a single bagpack (-) Favorable variance between Standard and Actual cost per bagpack Acual cost of a single bagpack $ $ -0.20 37.60 Requirement 3 (9120/6) SQ of Materials required Units Yards of materials req.p.u 1520 yards 400 units 3.8 yards p.u (1520/400)

Requirement 4 $ 5,520 U Material Price Variance = 11040-5520 (AQ*SR)-(AQ*AR) Requirement 5 $ Standard Labor cost allowed Standard labor hours Standard labor rate (5040/480) 5,040 480 hrs 10.50 per hr $ Requirement 6 $ Actual cost per bag pack No. of units manufactured Total Actual cost for manufacture (400*$37.60) (-) Actual Material cost (-) Actual Variable OH cost Actual Labor cost $ $ $ $ 37.60 400 15,040 5,520 -2,620 6,900 $ 600 U Labor rate variance = (600*10.50)-6900 (AH*SR)-Actual labor cost $ 1,260 U Labor efficiency variance = 5040-(600*10.50) (Standard labor cost - (AH*AR)] Requirement 7 $ 1,420 U Variable OH rate variance = (600*2)-2620 (AH*SR)-Actual Variable OH cost $ 240 U Labor efficiency variance = 960-(600*2) (Standard Variable OH cost - (AH*AR)]

Requirement 8 Standard Cost card Standard Quantity or Hours Direct Materials 3.80 yards Direct Labor 1.20 hours Variable OH 1.20 hours Standard Price or Rate Standard Cost $ 6.00 per yard $ $ 10.50 per hour $ $ 2.00 per hour $ Total $ 22.80 12.60 2.40 37.80