Highland Company produces a lightweight backpack that is popular with college st

Question

Highland Company produces a lightweight backpack that is popular with college students. S variable costs relating to a single backpack are given below Standard Quantity or Hours Standard Price Standard or Rate Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per s 5.00 per yard S ? per direct labor-hour S ? Overhead is applied to production on the basis of direct labor-hours. During March, 440 backpacks were manufactured and sold. Selected information relating to the month's production is given below Variable Materials Manufacturing Used Direct Labor S 9,460 S 6,468 $ 8,048 Overhead S 1.232 S 1,641 Total standard cost allowed Actual costs incurred Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Variable overhead rate variance $ 600 U Variable overhead efficiency variance The following additional information is available for March's production: Actual direct labor-hours Difference between standard and actual cost per backpack produced 690 S 0.20 F during March 1. What was the labor rate variance for March? The labor efficiency variance? 2. What was the variable overhead rate variance for March? The variable overhead efficiency variance? 3. Prepare a standard cost card for one backpack.

Explanation / Answer

LABOUR RATE VARIANCE IS $179 U

LABOUR EFFICIENCY VARIANCE IS $7383 LESS $6468 = $915 U

TOTAL LABOUR VARIANCE = $1094

1094/440 = $2.48 ADVERSE

2. VARIABLE OVERHEAD RATE VARIANCE $261 U

3)

STD COST

DM = $5 X 4.30 YDS = $21.50

DL = 1.40 HOURS X $10.50 = $14.70

VOH = 1.40 HOURS X $2= $2.80

THUS STD COST = $39.00

IF VARIANCE OVERALL IS FAV /20 CTS

THEN

ACTUAL STD COST WAS $38.80

DIRECT MATERIALS

DIRECT

LABOUR

VARIABLE

OVERHEADS

$

$

$

ACTUAL

8048

690

690

1641

261 U

10060

600ADV

690 X $2

1380

148

U

440 X 4.30 X $5

616 X $2

STD

9460

6468

1232

DIRECT MATERIALS

DIRECT

LABOUR

VARIABLE

OVERHEADS

$

$

$

ACTUAL

8048

690

690

1641

261 U

10060

600ADV

690 X $2

1380

148

U

440 X 4.30 X $5

616 X $2

STD

9460

6468

1232

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