Question

Each chair by Katherine Supply requires the costs shown In the past month, the company produced 1,200 chairs and incurred total costs of $60,000. Standard Quantity per Unit Price Direct materials$7.50 per sq yd2.5 sq. yds. Direct Labor $9.50 per hr 2.2 hrs 2.2 hrs Factory overhead$4.80 per hr Cost Unit Unit a. Calculate the standard cost per unit b. Determine if the company has a favorable or unfavorable cost variance for the month. tes

Answer 1

Answer (a):

Standard cost per unit = $50.21

Workings:

Answer (b):

Standard cost per unit = $50.21

Standard cost for 1,200 chairs = $50.21 * 1,200 = $60,252

Actual cost incurred for 1,200 chairs = $60,000

Cost Variance = Standard cost for 1,200 chairs - Actual cost for 1,200 chairs = $60,252 - $60,000 = $252 Favorable.

Actual cost incurred is less than the standard cost and hence variance is favorable.

As such the company has favorable cost variance of $252