Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2463133 • 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 $14 per direct labor hour ($14.00 ÷ 1.00). It was computed from a master manufacturing overhead budget based on normal production of 5,400 direct labor hours (5,400 units) for the month. The master budget showed total variable costs of $40,500 ($7.50 per hour) and total fixed overhead costs of $35,100 ($6.50 per hour). Actual costs for October in producing 4,400 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.
Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)
Compute the total overhead variance.
Direct materials—2 pound plastic at $7.44 per pound $ 14.88 Direct labor—1.00 hours at $12.00 per hour 12.00 Variable manufacturing overhead 7.50 Fixed manufacturing overhead 6.50 Total standard cost per unit $40.88Explanation / Answer
Total Material variance (Actual cost- budget Cost) (68594-2*4400*7.44) = 3122 A Material price variance (Actual Cost- standard cost for actual qty) (68594-8990*7.44) = 1708.4 A Material Qty variance (Actual Usage in units- Standard usages in units)*Standard Cost per unit (8990-4400*2)*7.44 = 1413.6 A Total Labor variance (Actual cost- budget Cost) (52847-4400*1*12) = 47 A Labor price variance (Actual Labor cost-Standard labor cost for actual qty) (52847-4300*12) = 1247 A Labor Qty Variance (Actual Hours used-standard hour )*Standard rate (4300-4400)*12 = 1200 F Total Overhead variance (Actual cost- Standard Cost) (44288+19382-4300*7.5-4300*6.5) = 3470 A