Problem 10-16 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] Highland

Question

Problem 10-16 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

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, 700 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:

*For the month's production.

The following additional information is available for March’s production:

Required:

Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements.

1. What is the standard cost of a single backpack?

2. What was the actual cost per backpack produced during March?

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

4. What was the materials price variance for March if there were no beginning or ending inventories of materials?

5. What is the standard direct labor rate per hour?

6. What was the labor rate variance for March? The labor efficiency variance?

7. What was the variable overhead rate variance for March? The variable overhead efficiency variance?

8. Prepare a standard cost card for one backpack.

Standard Quantity
or Hours Standard Price
or Rate Standard
Cost Direct materials ? $ 4.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ?

Explanation / Answer

Answer. Standard Actual SQ / SH SR Total AQ / AH AR Total Direct Material           2,800.00                                 4.00    11,200.00    2,975.00                                      3.00      8,925.00 $11,200 / $6 $8,925 / 2,975 Yards Direct Labor           1,050.00                               10.00    10,500.00    1,050.00                                    10.10    10,605.00 $10,500 / 1,050 hrs $10,605 / 1,050 hrs Variable MOH           1,050.00                                 2.00      2,100.00    1,050.00                                      3.84      4,032.00 $4,032 / 1,050 Hrs Total    23,800.00    23,562.00 Difference between Standard & actual cost per backpack = $0.34 (F) No. of backpack produced = 700 Standard Cost - Actual Cost = $0.15 Standard Cost per Bag = $23,800 / 700 Nos = $34 $34 - Actual Cost = $0.34 Actual Cost per Backpack = $34 - $0.34 = $33.66 Total Actual Cost = $33.66 X 700 Nos = $23,562 Actual Direct Labor Cost = $23,562 - ($8,925 + $4,032) Actual Direct Labor Cost = $10,605 Material Quantity Variance = (SQ - AQ) X SR = $700 (U) (2,800 - AQ) X $4 = (-)$700 AQ = 2,975 yards Answer 1. Standard Cost of Single Backpack: Material         11,200.00 Direct Labor         10,500.00 Variable MOH           2,100.00 Total Standard Cost         23,800.00 No. of Backpack Produced                     700 Standard Cost of Single Backpack                 34.00 Answer 2. Actual Cost of Single Backpack: Material           8,925.00 Direct Labor         10,605.00 Variable MOH           4,032.00 Total Standard Cost         23,562.00 No. of Backpack Produced                     700 Actual Cost of Single Backpack                 33.66 Answer 3. Standard Material Required per Unit Total Material required in Yards                 2,800 No. of Backpack Produced                     700 Standard Material Reqd. per Unit                          4 Answer 4. Material Price Variance = (SR - AR) X AQ Material Price Variance = ($4 - $3) X 2,975 yards Material Price Variance = $2,975 (F) Answer 5. Std DL Rate per Hour - $10,500 / 1,050 hrs                 10.00 Answer 6. Labor Rate Variance = (SR - AR) X AH Labor Rate Variance = ($10 - $10.10) X 1,050 Hrs Labor Rate Variance = $105 (U) Labor Efficiency Variance = (SH - AH) X SR Labor Efficiency Variance = (1,050 hrs - 1,050 hrs) X $10 Labor Efficiency Variance = $0 Answer 7. Variable Overhead Rate Variance = (SR - AR) X AH Variable Overhead Rate Variance = ($2 - $3.84) X $1,050 hrs Variable Overhead Rate Variance = $1,932 (U) Variable Overhead Efficiency Variance = (SH - AH) X SR Variable Overhead Efficiency Variance = (1,050 hrs - 1,050 hrs) X $2 Variable Overhead Efficiency Variance = $0 Answer 8. Standard Cost Card for One Backpack: Standard Quantity or hours Standard Price of Rate Standard Cost Direct Material 4 Yards $4 per Yard            16.00 Direct Labor 1.50 hrs $10 per hr            15.00 Variable MOH 1.50 hrs $2 per DLH              3.00 Total Standard Cost            34.00

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