Highland Company produces a lightweight backpack that is popular with college st
ID: 2425116 • 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, 480 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.)
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below:
Explanation / Answer
Answer:1
Materials...............................................................................................
$12,672
Direct labor..........................................................................................
4896
Variable manufacturing overhead.........................................................
1152
Total standard cost (a)..............................................................................
$18,720
Number of backpacks produced (b).........................................................
4,80
Standard cost of a single backpack (a) ÷ (b)............................................
$39
Answer:2
Standard cost of a single backpack (above).............................................
$39
Deduct favorable variance between standard and actual cost...................
(0.15)
Actual cost per backpack.........................................................................
$38.85
Answer:3
Total standard cost of materials used during March (a)............................
$12,672
Number of backpacks produced during March (b)..................................
4,80
Standard materials cost per backpack (a) ÷ (b).........................................
$26.4
Standard material cost per backpack/Standard material cost per yard
=$26.4/$6.00 per yard
=4.4 yards per backpack
Answer:
4.
Standard cost of material used....................................
$12,672
Actual cost of material used....................................
11,210
Total variance..........................................................
$1462
F
Because there were no beginning or ending raw materials inventories, the materials purchased were all used in production during the month. Therefore, the price and quantity variances together equal the total variance. If the quantity variance is $780 U, then the price variance must be $2,24200 F:
Price variance....................................................
$22,42
F
Quantity variance..............................................
780
U
Total variance....................................................
$1462
F
Materials...............................................................................................
$12,672
Direct labor..........................................................................................
4896
Variable manufacturing overhead.........................................................
1152
Total standard cost (a)..............................................................................
$18,720
Number of backpacks produced (b).........................................................
4,80
Standard cost of a single backpack (a) ÷ (b)............................................
$39