Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2459161 • Letter: C
Question
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 It was computed from a master manufacturing overhead budget based on normal production of 11,600 direct labor hours (5,800 units) for the month. The master budget showed total variable costs of S69,600 ($6.00 per hour) and total fixed overhead costs of $69,600 ($6.00 per hour). Actual costs for October in producing 3,400 units were as follows. The purchasing department buys the quantifies of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. (a) Compute ail of the materials and labor variances. (Round answers to 0 decimal places, e.g. 250.) Compute the total overhead variance.Explanation / Answer
1)STandard quantity (SQ) = 3400*1 = 3400Pounds
Total material variance = AQ *AR -SQ*SR
= 25812 - (3400*6.91)
= 25812 - 23494
= 2318 (U)
Material price variance = AQ*AR - AQ*SR
= 25812 - (3590 * 6.91)
= 25812 - 24806.9
= 1005.1 (U)
Material quantity variance = SR*AQ -SR *SQ
= 6.91 * 3590 - 6.91 * 3400
= 24806.9 - 23494
= 1312.9 (U)
2)Standard hours = 3400 *2 =6800 hours
Total labor variance = AH*AR - SH *SR
= 75710 - 6800*11
= 75710 - 74800
= 910 (U)
Labor price variance = AH*AR -AH*SR
= 75710 - (6700*11)
= 75710 - 73700
= 2010(U)
Labor quantity variance =SR *AH - SR *SH
= (11* 6700 ) -(11* 6800)
= 73700- 74800
= - 1100 (F)
B)Total overhead absorbed = Standard variable overhead +Budgetd fixed overhead
= (SH * Standard variable overhead) + Budgetd fixed overhead
= ( 6800 * 6 ) + 69600
= 40800 +69600
= 81600
Total overhead variance = Actual overhead -Absorbed overhead
= (60545+23075) - 81600
= 83620 - 81600
= 2020 (U)