Question

Rogen uses the standard cost system. The Static original budgeted production was 5,000 units for October. The Input standards were: Std Quantity x Std Price per input =Std Cost per Output U Direct materials 1 lb./Output unit x $7/lb. = $7 per output unit Direct labor 1.6 hrs. /Output unit x $12/hr. = $19.20 per unit Variable manufacturing (Mfg.) overhead 1.6 hrs. x $7.50 per hr = $12 per unit Fixed mfg. overhead (Budget $20,000) 1.6 hrs.. x $2.50 per hr $4 per unit It Applied the standard costs to Actual Production throughout the period. As of the end of the period, a Flexible budget was prepared, to compute Production volume variance, and the Quantity Usage efficiency variances for Material and Labor actual usages separately. When Actual Costs are known a couple months later, it retroactively calculated Material Purchase Price and Labor Rate (or Price) variances; and Overhead Controllable variances. Rogen gathered the following actual results for October: Actual Units produced 4,800 Direct materials purchased and used (5,100 lbs.) $36,720 Direct labor cost (7,400 hours actual) $92,500 Manufacturing overhead costs incurred: Variable $59,700 and Fixed $21,000.

Answer 1

= Solution 5. Direct Material per unit Actual units produced Standard unit usage 1 lb/output unit 4800 units 4800 x 1 lb 4800 lbs 5100 lbs $36,720.00 Actual Direct materials = Material Efficiency Variance = (Actual unit usage - Standard unit usage) x Standard cost per unit (5100 lbs - 4800 lbs) < $7 300 lbs x $7 $ 2,100.00 Unfavourable Solution 6. Standard Labour Rate Actual Labour costs Actual Hours worked Actual Labour Rate $ $ = (a) (b) (a/b) 12.00 per hour 92,500 7400 hours 12.50 per hour = $ Labor rate Variance = = (Actual Rate - Standard Rate) x Actual hours worked ($12.50 - $12.00) x 7400 hours $0.50 x 7400 hours $ 3,700.00 Unfavourable

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