Question

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

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The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored. 

Required:

 1. How many units were produced last period?

 2. How many pounds of direct material were purchased and used in production?

 3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

 4. How many actual direct labor-hours were worked during the period?

 5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

 6. How much actual variable manufacturing overhead cost was incurred during the period?

Answer 1

Solution 1:

Number of units produced = Standard cost of material / Standard cost per unit of material = $405,000 / $18 = 22500 units

Solution 2:

Material quantity variance = $9,000 U

(SQ - AQ) * SP = -$9,000

(22500*6 - AQ) * $3 = -$9,000

Actual pound of material purchased and used in production = 138000 pound

Solution 3:

Direct material price variance = $6,900 F

(SP - AP) * AQ = $6,900

($3 - AP) * 138000 = $6,900

Actual price per pound = $2.95 per pound

Solution 4:

Direct labor efficiency variance = $21,000 U

(SH - AH) * SR = - $21,000

(22500*0.8 - AH) * $15 = -$21,000

Actual hours = 19400 hours

Solution 5:

Direct labor rate variance = $14,550 U

(SR - AR) * AH = - $14,550

($15 - AR) * 19400 = - $14,550

Actual rate of direct labor = $15.75 per labor hour

Solution 6:

Variable overhead efficiency variance = (SH - AH) *SR

= (22500*0.8 - 19400) *$3 = $4,200 U

Actual variable manufacturing overhead cost = Standard cost - Favorable rate variance + Unfavorable efficiency variance

= $54,000 - $1,300 + $4,200 = $56,900