Putnam Corporation manufactures a single product. The standard cost per unit of
ID: 2376094 • Letter: P
Question
Putnam Corporation manufactures a single product. The standard cost per unit of product is shown below.Direct materials-1 pound plastic at $7.00 per pound $ 7.00
Direct labor-1.5 hours at $12.00 per hour 18.00
Variable manufacturing overhead 11.25
Fixed manufacturing overhead
3.75
Total standard cost per unit
$40.00
The predetermined manufacturing overhead rate is $10 per direct labor hour ($15.00 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 7,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $56,250 ($7.50 per hour) and total fixed overhead costs of $18,750 ($2.50 per hour). Actual costs for October in producing 4,900 units were as follows.
Direct materials (5,100 pounds) $ 37,230
Direct labor (7,000 hours) 87,500
Variable overhead 56,170
Fixed overhead
19,680
Total manufacturing costs
$200,580
The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.
Incorrect.
Compute all of the materials and labor variances.
Total materials variance $
Materials price variance $
Materials quantity variance $
Total labor variance $ Favorable
Labor price variance $
Labor quantity variance $
Explanation / Answer
Material variances: SP = $7.00 SQ for actual output = 4,900*1pound = 4,900pounds AP = $37,230/5,100 = $7.30 AQ = 5,100pounds Total material variance = SPSQ - APAQ = (7*4,900) - (7.30*5,100) = 2,930U Material Price Variance = SPAQ - APAQ = (7*5,100)- (7.3*5,100) = 1,530U Material quantity variance = SPSQ - SPAQ = (7*4,900) - (7*5,100) = 1,400U Labor variances: SR = $12per hour SH for actual output = 4,900*1.5 = 7,350hours AR = $87,500/7,000= $12.50per hour AH = 7,000hours Total Labor variance = SRSH - ARAH = (12*7,350) - (12.50*7,000) = 700F Labor price variance = SRAH - ARAH = (12*7,000) - (12.50*7,000) = 3,500U Labor quantity variance = SRSH - SRAH = (12*7,350) - (12*7,000) = 4,200F SP = Standard price SQ = Standard quantity AP = actual price AQ = actual quantity SR = Standard rate SH = Standard hours AR = actual rate AH = actual hours
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