Question

Required information [The following information applies to the questions displayed below. A manufactured product has the following information for June. Direct materials 1 Actual lbs. @ $7.20 per 9 54,400 lb. Standard (7 lbs. @ $7 per lb.) (3 hrs. @ $15 per hr.) (3 hrs. @ $12 per hr.) Direct labor Overhead Units manufactured 32 saa hrs. @ $15.50 per 22,8001 hr. $283,300 7,700 (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

Answer

• Working

Actual DATA for		7700	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	54400	$                   7.20	$        391,680.00
Direct labor	22800	$                15.50	$        353,400.00
Variable Overhead	22800	$                12.43	$        283,300.00

Standard DATA for		7700	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 7 lbs x 7700 units)=53900 lbs	$                   7.00	$     377,300.00
Direct labor	( 3 hours x 7700 units)=23100 hours	$                15.00	$     346,500.00
Variable Overhead	( 3 hours x 7700 units)=23100 hours	$                12.00	$     277,200.00

• [1] Standard cost per unit
  Direct Material = $ 377300 / 7700 = $ 49
  Direct Labor = $ 346500 / 7700 = $ 45
  Overhead = $ 277200 / 7700 units = $ 36
  Total = 49 + 45 + 36 = $ 130
• Total Cost Variance = Standard cost – Actual Cost
  = $ 1,001,000 – 1,028,380
  = $ 27380 Unfavourable
• Other Requirements

--Material

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
54,400	x	$                     7.20		54,400	x	$            7.00		53,900	x	$               7.00
	$                    391,680.00				$               380,800.00				$                   377,300.00
Price Variance - Material			$               10,880.00	Quantity Variance - Material			$                 3,500.00

Direct material Price Variance	$               10,880.00	Unfavourable
Direct material Quantity Variance	$                 3,500.00	Unfavourable
Total Direct material Variance	$               14,380.00	Unfavourable

--Labor Cost

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
22,800	x	$                15.50		22,800	x	$        15.00		23,100	x	$              15.00
	$          353,400.00				$     342,000.00				$           346,500.00
Rate Variance - Labor			$       11,400.00	Efficency Variance - Labor			$         4,500.00

Labor Rate Variance	$       11,400.00	Unfavourable
Labor Efficiency Variance	$         4,500.00	Favourable
Total Labor Cost [Spending] Variance	$         6,900.00	Unfavourable