Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2453610 • Letter: C
Question
Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials—1 pound plastic at $7.22 per pound $ 7.22
Direct labor—1.00 hours at $12.00 per hour 12.00
Variable manufacturing overhead $6.50
Fixed manufacturing overhead $3.50
Total standard cost per unit $29.22
The predetermined manufacturing overhead rate is $10 per direct labor hour ($10.00 ÷ 1.00). It was computed from a master manufacturing overhead budget based on normal production of 5,900 direct labor hours (5,900 units) for the month. The master budget showed total variable costs of $38,350 ($6.50 per hour) and total fixed overhead costs of $20,650 ($3.50 per hour). Actual costs for October in producing 4,300 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. 125.)
Total materials variance
Materials price variance
Materials quantity variance
Total labor variance
Labor price variance
Labor quantity variance
(b) Compute the total overhead variance.
Direct materials (4,430 pounds) $ 33,136 Direct labor (4,140 hours) 50,632 Variable overhead 32,420 Fixed overhead 12,420 Total manufacturing costs $128,608Explanation / Answer
1)Material price variance =AQ *AR - AQ*SR
= 33136 - (4430 * 7.22)
= 33136 - 31984.60
= 1151.40 (U)
Material quantity variance = SR*AQ - SR*SQ
= 7.22 * 4430 - [7.22 *(4300 *1) ]
= 31984.60 - [7.22 * 4300]
= 31984.6 - 31046
= 938.60 (U)
Total material variance = price + quantity variance
= 1151.4 +938.6
= 2090 (U)
2)Labor rate variance = AH*AR - AH*SR
= 50632 - (4140 * 12)
= 50632 - 49680
= 952(U)
Labor efficiency variance = SR*AH -SR-SH
= 12* 4140 - 12 * (4300*1)
= 49680- 51600
=- 1920(F)
Total labor variance =rate +efficiency variance
= 952 (U) + (-1920F)
= 968 (F)
b)Total overhead variance = Actual overhead incurreD - (standard fixed and variabel overhead)
= (32420+12420) - [20650 + (4300*1*6.5) ]
= 44840 - [20650+ 27950]
= 44840 - 48600
=- 3760 (F)