XO-20 is an oil-based product used to remove rust on bolts and nuts that are stu
ID: 2473445 • Letter: X
Question
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.73 liters of material and 4 hours of labor. (0.73 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $13.70. Overhead is applied at the rate of $15.22 per can. Expected production is 8,100 cans with fixed overhead per year of $29,808 and variable overhead of $11.54 per unit (a 0.5-liter can).
During 2015, 7,600 cans were produced; 13,600 liters of material were purchased at a cost of $64,464; 10,130 liters of material were used in production. The cost of direct labor incurred in 2015 was $408,107, based on an average actual wage rate of $12.11 per hour. Actual overhead for 2015 was $124,000.
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.73 liters of material and 4 hours of labor. (0.73 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $13.70. Overhead is applied at the rate of $15.22 per can. Expected production is 8,100 cans with fixed overhead per year of $29,808 and variable overhead of $11.54 per unit (a 0.5-liter can).
During 2015, 7,600 cans were produced; 13,600 liters of material were purchased at a cost of $64,464; 10,130 liters of material were used in production. The cost of direct labor incurred in 2015 was $408,107, based on an average actual wage rate of $12.11 per hour. Actual overhead for 2015 was $124,000.
Explanation / Answer
Standard Cost per unit is 2.5*.73 = 1.825 per unit.
Variances are computed as shown below:
Standard Actual Units 8,100 cans Per unit 7600 Direct Labour 4 at $13.7 per hour 70312 33,700*12.11 per hour 4,08,107 12.9 per hour Direct Material .73 at $2.5 per litre 268800 13,600 at $ 64464 12.7 per board foot Direct Material 11,826*1.825 21582.45 10,130*4.74 48,016 Overhead $15.22 per can 1,24,000 Fixed overhead 29,808 Variable overhead $11.54 per unit Material Price Variance Actual Price Standard Price AP-SP Actual Quantity Variance (AP-SP)*Actual Qty 4.74 1.825 $2.92 10,130 29,529 U Material Usage Variance Actual Quantity Standard quantity AQ-SQ Standard Price Variance (AQ-SQ)*SP 10130 11,826 -1696 $1.83 -3,095 F Total Direct Material Variance is Actual Cost - Standard Cost Actual Cost Standard Cost 48016 10,130*4.74 $21,582 11,826*1.825 26434 U Labor price Variance Actual rate Standard rate Actual hours AR-SR Variance (AR-SR)*AH $12.11 13.7 33,700 ($1.59) ($53,583) F Labor quantity Variance Actual hours Standard Hours Standard rate SH-AH Variance (AH-SH)*SR 33,700 32,400 14 1,300 $17,810 U Labor Variance Actual hours Actual Rate Standard hours Standard Rate Variance (AH*AR - SH*SR) 33,700 12.11 32,400 14 ($35,773) FRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.