Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2381745 • Letter: C
Question
Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.Direct materials Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials Problem 25-1A (Part Level Submission) Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials Costello 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 ($28 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,400 direct labor hours (5,700 units) for the month. The master budget showed total variable costs of $85,500 ($7.50 per hour) and total fixed overhead costs of $74,100 ($6.50 per hour). Actual costs for October in producing 3,500 units were as follows. 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.
Explanation / Answer
Purchasing buys the quantity expected to be used, 7,190#, yet for 3,500 units produced in the month, only 7,190 # should have been purchased.
Actual DM 44,44 vs ((3500*12) Stnd = 2434
Materials price variance = AQ (AP - SP)
Stnd 6 vs Actual (44,434/7190) = .17 unfav x7190 # = 1294
Materials quantity variance = (AQ - SQ) SP
Stnd 7000 vs Actual 7190 = 190 unfav x 6 = 1140
Labor rate variance = AH(AR - SR)
Stnd 11.00 vs Actual (77970/6900)= .3 unfav x 6900= 2,070 unfav
Labor efficiency variance = (AH - SH) SR
Stnd 3500*2 vs Actual 6900 = 100 fav x 11.00 = 1100 fav.
Add the related variances up to get total variance. Variable overhead variance not calculated as not asked