Outdoor Company manufactures camping tents from a lightweight synthetic fabric.

Question

Outdoor Company manufactures camping tents from a lightweight synthetic fabric. Each tent has a standard materials cost of $21, consisting of 4 yards of fabric at $5.25 per yard. The standards call for 2 hours of assembly at $10 per hour. The following data were recorded for October, the first month of operations:

Fabric purchased 9,000 yards x $ 5.00 per yard

Fabric used in production of 1,700 tents7,000 yards

Direct labor used3,600 hours x $10.75 per hour

(a) Compute all standard cost variances for materials and labor

(b) Determine the standard variable cost of 1,700 tents produced, separated into direct materials and labor.

Materials Price Variance (usage basis) Materials Price Variance (purchases basis) Materials quantity variance Labor Rate Variance Labor Efficiency variance

Explanation / Answer

Answer to Question a Standard Material cost for 1700 tents: 35700 (1700*4*5.25) Actual Material cost for 1700 tents: 47250 (9000 *5.25) Material cost variance = $11,550 (A) 11550 (Actual Material Cost - Standard Material Cost) Standard labor cost for 1700 tents: 34000 (1700*2*10) Actual Labor cost for 1700 tents: 38700 (3600*10.75) Labor cost variance = $4,700(A) 4700 (Actual Labour Cost - Standard Labour Cost) Answer to Question b b) Standard cost of 1700 tents: Direct Materials: 35700 (1700*4*5.25) Labor Cost: 34000 (1700*2*10) Total Cost 69700

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