Highland Company produces a lightweight backpack that is popular with college st

Question

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:

  

  

      Overhead is applied to production on the basis of direct labor-hours. During March, 440 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:

  

  

  

  

      

      

How many yards of material are required at standard per backpack?

      

What was the materials price variance for March if there were no beginning or ending inventories of materials? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

      

What is the standard direct labor rate per hour?

      

What was the labor rate variance for March? The labor efficiency variance? (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

      

What was the variable overhead rate variance for March? The variable overhead efficiency variance? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

      

Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places.)

     

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:

Explanation / Answer

Since, there are multiple parts to the question, the first five have been answered.

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Part 1)

The standard cost per backpack has been calculated with the use of following table:

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Part 2)

The actual cost per backpack has been calculated with the use of following table:

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Part 3)

The Yards of Material required at standard per backpack has been calculated with the use of following table:

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Part 4)

The material cost variance has been calculated with the use of following table:

In the absence of opening and ending inventories, the material cost variance is the sum of material price variance and material quantity variance. We have been given material quantity variance as $600 (U). Therefore, material price variance will be equal to $2,012 (F) [1,412 + 600].

Material Price Variance = $2012 (F)

Since, actual cost of material used is less than standard cost of material used, material price variance is favorable as the company has incurred lower costs than what was expected.

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Part 5)

The standard direct labor rate per hour has been calculated with the use of following table:

Standard Cost for March Material 9,460 Labor 6,468 Variable Manufacturing Overhead 1,232 Total Standard Cost (A) $17,160 Number of Backpacks Produced (B) 440 Standard Cost Per Backpack (A/B) $39

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