You have recently accepted a position with Vitex, Inc., the manufacturer of a po

Question

You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study.

     On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information:

Variances Reported

You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

      It is now 8:30 a.m. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary “backup” data for the variances before the meeting begins. Without backup data it will be impossible to lead the discussion or answer any questions

Questions :

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

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

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

You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study.

Explanation / Answer

Standard Cost Card Qty Rate Amt $ Direct Material                     2.20               17.00               37.40 Direct Labor                     1.00               15.70               15.70 Manufacturing OH                     1.00                 9.20                 9.20 Total               62.30 Total Std cost of prodcution Total cost Units Produced std qty for output Direct Material        598,400.00      16,000.00       35,200.00 Direct Labor        251,200.00      16,000.00       16,000.00 Manufacturing OH        147,200.00      16,000.00       16,000.00     1.00 So units produced          16,000.00 Direct material Price variance= Std qty*( Std Price-Actual Price)=10788 35200*(2.2-Actual Price)=10788     3.00 Actual Price =                     1.89 per lb Direct Material Qty variance= Actual Price*(Std qty-Actual Qty)=-34000 1.89*(35200-Actual Qty)=-34000     2.00 So actual qty used and purchased =          17,989.42 lb     5.00 Direct Labor Price variance=Std labor Hrs*(std Rate-Actual Rate)=-3400   16000*(15.7-Actual rate)=-3400 Actual labor rate =                   15.91 per hr     4.00 Direct Labor qty variance=Actual labor rate*(std labor hr-Actual labor hrs)=-15700 15.91*(16000-Actual labor hrs)=-15700 So Actual labor hrs =          16,986.80 hrs     6.00 Variable Mfg OH Price variance =             4,600.00 F So actual Manufacturing OH incurred=        142,600.00

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