Question

Vernon Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.30 pounds $ 0.70 1.50 hours $ 7.30/hour $ 128,800 During Year 2, Vernon planned to produce 23,000 drip candles. Production lagged behind expectations, and it actually produced only 16,000 drip candles. At year-end, direct materials purchased and used amounted to 22,500 pounds at a unit price of $0.64 per pound. Direct labor costs were actually $6.70 per hour and 26,200 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $96,000. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor. f. Compute the fixed cost spending and volume variances. Complete this question by entering your answers in the tabs below. Req A and B Req C and D Req E Req F Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. (Round your answers to 2 decimal places.) Cost Standard cost per unit Direct material Direct labor Overhead Total per candle

Answer 1

Answer:

a&b
The total standard cost per candle is equal to material cost, labor cost and overhead cost for one candle.
Calculation of standard cost per candle
Direct materials	1.30*0.70	$0.91
Direct Labor	1.50*7.30	$10.95
Overhead	128800/23000	$5.60
Total standard cost per candle		$17.46
The standard cost per candle is $17.46
c&d
The total actual cost per candle is equal to actual costs incurred for material, labor and overhead for one candle
Direct materials	(22500/16000)*0.64	$0.90
Direct Labor	(26200/16000)*6.70	$10.97
Overhead	96000/16000	$6.00
Total standard cost per candle		$17.87
The actual cost per candle is $17.87
e.
Direct material
Price variance = (Standard price - Actual price)*actual quantity used
Price variance = (0.70-0.64)*22500
Price variance	1350	F
Usage variance = (Standard quantity - Actual quantity)*Standard price
Usage variance = (20800-22500)*0.70
Usage variance	1190	U
Standard quantity = 1.30*16000	20800
Direct Labor
Price variance = (Standard labor price - Actual labor price)*Actual labor hours used
Price variance = (7.30-6.70)*26200
Price variance	15720	F
Usage variance = (Standard labor hours - Actual labor hours)*Standard labor price
Usage variance = (24000- 26,200)*7.30
Usage variance	16060	U
Standard labor hours = 1.50*16000	24000
f.
Spending variance = (Standard fixed cost - actual fixed costs)
Spending variance = (128800-96000)
Spending variance	32800	F
Volume variance = (Applied overhead - Standard overhead)
Volume variance = ((16000*5.60) - 128800)
Volume variance	37600	U
Standard cost per unit = 128800/23000	5.6