Problem 10-16 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] Highland
ID: 2561478 • Letter: P
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, 790 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 Quantityor Hours Standard Price
or Rate Standard
Cost Direct materials ? $ 5.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ?
Explanation / Answer
1. Standard cost of a single backpack:
Total standard cost =Materials+direct labour+variable manufacturing overhead
=$15,800+13,272+2528
=$31,600
Standard cost per backpack=total standard cost/number of backpack produced
=$31,600/790
=$40 per backpack
2.
Actual cost per backpack=standard cost of a single backpack-favourable variance between actual and standard cost
=$40-$.10
=$39.90
3.
Standard material cost per backpack= total standard cost of material/number of backpack
=$15,800/790
=$20
Yards of material required at standard per backpack=standard material cost per backpack/std material cost per yard
=$20 per backpack/$5 per yard
=4 yards per backpack
4.
Total variance=standard cost of material used-actual cost of material used
=$15,800-$13,120
=$2,680 F
Total variance=price variance +quantity variance
$2680 F=price variance+$600 U
Price variance=$2680+$600
=$3280 F
5. Standard direct labour hours=standard variable manufacturing overhead cost/standard variable manufacturing overhead rate per direct labour hour
=$2,528/$2 per direct labour hour
=1264 Direct labour hours
Standard direct labour rate per hour=total standard direct labour cost/total standard direct labour hours
=$13,272/1264
=$10.50 per direct labour hour
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