Problem 11-1A Costello Corporation manufactures a single product. The standard c
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Question
Problem 11-1A
Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
The predetermined manufacturing overhead rate is $12 per direct labor hour ($12.00 ÷ 1.00). It was computed from a master manufacturing overhead budget based on normal production of 5,800 direct labor hours (5,800 units) for the month. The master budget showed total variable costs of $40,600 ($7.00 per hour) and total fixed overhead costs of $29,000 ($5.00 per hour). Actual costs for October in producing 3,400 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.
(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 250.)
Direct materials—1 pound plastic at $7.39 per pound $ 7.39 Direct labor—1.00 hours at $11.00 per hour 11.00 Variable manufacturing overhead 7.00 Fixed manufacturing overhead 5.00 Total standard cost per unit $30.39Explanation / Answer
Answer (a)
Direct Material
Direct Labour
Answer (b) Overhead Variance
Standard Quantity of Direct material per unit (in pounds) 1 Standard Price of Direct material per pound 7.39 Standard Direct labour hours required per unit 1 Standard Rate per Direct labour hour 11 Variable manufacturing overhead per unit 7 Fixed manufacturing overhead per unit 5 Actual Units produced 3400 Standard Quantity of Direct Material required (SQ): 3400*1 3400 Standard Price per Pound (SP) 7.39 Actual quantity of Direct Material used: (AQ) 3590 Actual cost of direct material: (AP*AQ) 27571 Total Material Variance: (SP*SQ)-(AP*AQ)= (7.39*3400)-27571 -2445 unfavourable Direct Material Price Variance= (SP*AQ)-(AP*AQ): (7.39*3590)-27571 -1040.9 unfavourable Direct materials quantity variance (SP*SQ)-(SP*AQ) : (7.39*3400)-(7.39*3590) -1404.1 unfavourable