Problem 11-6 (Part Level Submission) XO-20 is an oil-based product used to remov
ID: 2452558 • Letter: P
Question
Problem 11-6 (Part Level Submission)
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.71 liters of material and 4 hours of labor. (0.71 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $12.40. Overhead is applied at the rate of $15.91 per can. Expected production is 7,700 cans with fixed overhead per year of $31,185 and variable overhead of $11.86 per unit (a 0.5-liter can).
During 2015, 7,620 cans were produced; 13,800 liters of material were purchased at a cost of $60,030; 10,120 liters of material were used in production. The cost of direct labor incurred in 2015 was $355,300, based on an average actual wage rate of $10.45 per hour. Actual overhead for 2015 was $121,000.
(a)
b. Calculate material, labor, and overhead variances. (Round answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.) Determine whether it is favorable,unfavorable,neither favorable nor favorable
*Please show workings
Problem 11-6 (Part Level Submission)
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.71 liters of material and 4 hours of labor. (0.71 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $12.40. Overhead is applied at the rate of $15.91 per can. Expected production is 7,700 cans with fixed overhead per year of $31,185 and variable overhead of $11.86 per unit (a 0.5-liter can).
During 2015, 7,620 cans were produced; 13,800 liters of material were purchased at a cost of $60,030; 10,120 liters of material were used in production. The cost of direct labor incurred in 2015 was $355,300, based on an average actual wage rate of $10.45 per hour. Actual overhead for 2015 was $121,000.
Explanation / Answer
Standard cost per unit;
Standard cost per unit. = Standard Material Cost per unit + Standard Labor cost per unit + fixed overhead cost per unit + Variable overhead cost per unit
Standard cost per unit. = 0.71*2.50 + 4*12.40 + 31,185/7700 + 11.86=$83.26
Standard cost per unit = $ 83.26 per unit
b) Material price variance= (actual rate-standard rate)*actual materials
= (4.35-2.5)*7625=14,097
Material Quantity variance= (standard quantity-actual quantity)* standard rate
= (7700-7620)*2.5=$200