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 Qtity Standard Price Standard or Rate $4.00 per yard or Hours Cost S? Direct materials 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, 490 backpacks were manufactured and sold. Selected information relating to the month's production is given below: Variable Manufacturing Overhead 1,176 $1,249 Materials Used Direct Labor S5,586 $8,820 $7,035 Total standard cost allowed* Actual costs incurred Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance $560 U "For the month's production The following additional information is available for March's production Actual direct labor-hours Standard overhead rate per direct labor-hour Difference between standard and actual cost per backpack produced during March 750 2.00 $0.20 F

Answer 1

Highland Compan Standard cost for March p Materials Direct labour Variable Mfg. OH Total Std. cost No. of Backpacks produced Std. cost of a single backpack rod 8820 5586 1176 15582 490 31.8 Part 2 Standard cost of a single backpack less:- Difference Actual cost per backpack 31.8 0.2 31.6 Part 3 Total Std. cost of materials (a) No. of Backpacks produced (b) Std. Mat. Cost per backpack ( a/b) (c) Std. Mate. Cost per yard (d) NO. of yards per backpack (c/d) 8820 490 18 4.5 Part 4 MPV ( balancing figure) (1785 560) MQV Spending variance (8820- 7035) 2345 (F) 560 (U) 1785 (F) Part 5 Std. var. Mfg. oH (a) Std. var. Mfg. oH per DLH (b) Std. DLH (a/b) (c) Std. direct labour cost (d) Std. DL rate per hour (d/c) 1176 588 5586 9.5

Part 6 LRV (balancing figure 1614 -1539) LEV (Std. hours allowed for actual production Actual hours) SR 75 (U) 588 750)9.5 Spending variance(5586-7200)[ for 7200 see working note below 1539 (U) 1614 (U) Working not Actual cost for March pro Materials Direct labour (balancing figure) Variable Mfg. OH Total Actual cost (31.6 490) No. of Backpacks produced Actual cost of a single backpack 7035 7200 1249 15484 490 31.6 Part 7 VOH rate variance (balancing figure) (324-73) VOH efficiency variance:- (Std. hours allowed for actual production Actual hours) SR (588 750) *2 Spending variance (1176- 1249) 251 (F) 324 (U) 73 (U) Part 8-Standard cost card Direct materials Direct labour VOH Total standard cost Std. qty. or hoursSP or SR 4.5 yards 1.2 DLH 1.2 DLH (588/490 1.2) Std. cost 18 11.4 2.4 31.8 9.5