Rogen Corporation manufactures a single product. The standard cost per unit of p

Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below $ 8.00 5.58 2.75 5.25 $21.58 Direct materials-1 pound plastic at $8 per pound Direct labor-0.50 hours at $11.15 per hour Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit The predetermined manufacturing overhead rate is $16 per direct labor hour ($8.00 ÷ 0.50). It was computed from a master manufacturing overhead budget based on normal production of 2,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $13,750 ($5.50 per hour) and total fixed overhead costs of $26,250 ($10.50 per hour). Actual costs for October in producing 3,900 units were as follows $32,886 20,038 21,838 11,362 $86,124 Direct materials (4,060 pounds) Direct labor (1,750 hours) Variable overhead Fixed overhead Total manufacturing costs 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 gnored

Explanation / Answer

Material : Std qty allowed for actual output (3900 units @1) 3900 Std price per unit 8 Actual qty used 4060 Actual price per unit: (32886/4060) 8.1 Material cost variance = Std qty*Std price -Actual Qty*Actual price (3900*8) - (4060*8.10) = 1686 U Material price variance = Actual Qty (Std price -Actual price) 4060 ( 8.00 -8.10 ) = $ 406 U Material efficiency Variance = Std rate (Std qty-Actual qty) 8.00 ( 3900-4060 ) = $ 1280 U Labour; Std Labour hours allowed for actual output (3900 units @ 0.5) 1950 hours Std labour rate per hour 11.15 Actual labour hours 1750 Actual rate per hour (20038/1750) 11.45 Labour cost variance = Std hours*Std rate-Actual Hourrs*Actual rate 1950 *11.15 - 1750*11.45 = 1705 F Labour rate variance = Actual Hours (Std rate-Actual rate) 1750 (11.15 -11.45)=$ 525 U Labour Efficiency Variance = Std rate (Std hours-Actual hours) 11.15 ( 1950 -1750) = $ 2230 F Total Overheads: Std OH rate per hour: $ 16 Std labour hours; 1950 hours Actual OH incurred (21838+11362)= $33,200 Total OH variance = Std Hours*Std OH rate -   Actual Ohh incurred 1950 *16 -   $33200 = $ 2000 U

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