Highland Company produces a lightweight backpack that is popular with college st
ID: 2549638 • Letter: H
Question
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, 420 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:
How many yards of material are required at standard per backpack?
What was the materials price variance for March if there were no beginning or ending inventories of materials? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
What is the standard direct labor rate per hour?
What was the labor rate variance for March? The labor efficiency variance? (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))
What was the variable overhead rate variance for March? The variable overhead efficiency variance? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))
Prepare a standard cost card for one backpack. (Round your answers to 2 decimal places.)
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 $?
Explanation / Answer
1. Standard Cost of one backpack Standard cost for March Production Direct Material $6,720 Direct Labour $4,368 Variable Manufacturing Overhead $1,092 Total Standard Cost $12,180 Number of backpack produced 420 Standard cost per backpack $29 2. Actual cost per backpack produced during March Standard cost per backpack $29 Less: Difference between standard and actual cost per backpack (F) $0.15 Actual cost per backpack $28.85 3. Yards of material required at standard per backpack Standard cost of material allowed $6,720 Number of backpack produced 420 Standard cost of material per backpack $16 Yards of material required at standard per backpack = Standard cost of material per backpack standard rate per yard = $16/$4 = 4 yards per backpack 4. Material Price variance for March if there were no beginning or ending inventories of material Standard Cost of material $6,720 Actual cost of material $5,340 Total variance $1,380 As there were no beginning or ending inventories of material, all material purchased was used in production, thus price and quantity variance together equal the total variance Total Variance $1,380 F Add: Quantity variance $400 U Price Variance $1,780 F 5. Standard direct labour rate per hour Standard Variable manufacturing overhead $1,092 Standard Variable manufacturing overhead rate per direct labour hour $2 Standard direct labour hour (1092/2) 546 Standard direct labour for March $4,368 Standard direct labour rate per hour (4368/546) $8 6. Labour rate variance for March First we have to calculate actual cost for March Actual cost per backpack $28.85 Number of backpack produced 420 Actual cost for March $12,117 Less: Direct Material $5,340 Variable Manufacturing overhard $827 Actual labour cost for March $5,950 Actual direct labour hour for March 700 Actual direct labour rate per houor $8.50 Actual hour at actual rate (700 x $8.50) $5,950 Actual hour at standard rate (700 x $8) $5,600 Labour Rate variance $350 U Actual hour at standard rate (700 x $8) $5,600 Standard hour at standard rate (546 x $8) $4,368 Labour efficiency variance $1,232 U Labour Rate variance $350 U Labour efficiency variance $1,232 U Total Variance $1,582 U 7. Variable overhead rate variance Actual hour at actual rate $827 Actual hour at standard rate (700 x $2) $1,400 Variable overhead rate variance $573 F Variable overhead efficiency variance Actual hour at standard rate (700 x $2) $1,400 Standard hour at standard rate (546 x $2) $1,092 Variable overhead efficiency variance $308 U Variable overhead rate variance 573 F Variable overhead efficiency variance 308 U Total Variance 265 F 8. Standard cost card for one backpack Standard Quantity or Hours Standard Price or Rate Standard Cost Direct Material 4 yards $4 per yard $16 Direct Labour 1.30 hours $8 per hour $10.40 Variable manufacturing overhead 1.30 hours $2 per hour $2.60 Total Standard Cost $29 Standard labour hour per backpack = standard labour for march/number of backpacks = 546/420 = 1.30
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