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.

The predetermined manufacturing overhead rate is $14 per direct labor hour ($7.00 ÷ 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 $16,250 ($6.50 per hour) and total fixed overhead costs of $18,750 ($7.50 per hour). Actual costs for October in producing 4,400 units were as follows.

Total manufacturing costs 86,871

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 ignored.

(a)

Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

Direct materials—1 pound plastic at $6 per pound $ 6.00 Direct labor—0.50 hours at $12.35 per hour 6.18 Variable manufacturing overhead 3.25 Fixed manufacturing overhead 3.75 Total standard cost per unit $19.18

Explanation / Answer

Solution a:

Standard quantity of material for actual production = 4400*1 = 4400 pound

Actual quantity of material = 4560 pound

Standard price of material = $6

Actual price of material = $27,816 / 4560 = $6.10

Material price variance = (SP - AP) * AQ = ($6 - $6.10) * 4560 = $456 U

Material quantity variance = (SQ - AQ) * SR = (4400 - 4560) * $6 = $960 U

Total material variance = Material price variance + Material quantity variance = $456 U + $960 U = $1,416 U

Standard hours of direct labor = 4400 * 0.50 = 2200 hours

Standard rate of direct labor = $12.35

Actual hours of direct labor = 2100

Actual rate of direct labor = $26,355 / 2100 = $12.55 per hour

Direct labor rate variance = (SR - AR) * AH = ($12.35 - $12.55) * 2100 = $420 U

Direct labor efficiency variance = (SH - AH) * SR = (2200 - 2100) * $12.35 = $1,235 F

Total direct labor variance = Direct labor rate variance + Direct labor efficiency variance

= $420 U + $1,235F = $815 F

Solution b:

Actual manufacturing overhead = Variable overhead + Fixed overhead

= $21,558 + $11,142 = $32,700

Manufacturing overhead applied = (Standard hours for actual production * Standard rate)

= (4400*0.50 * $14) = $30,800

Total overhead variance = Manufacturing overhead applied - Actual manufacturing overhead

= $30,800 - $32,700

= $1,900 U

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