Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2467977 • 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 $10 per direct labor hour ($20.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 10,600 direct labor hours (5,300 units) for the month. The master budget showed total variable costs of $84,800 ($8.00 per hour) and total fixed overhead costs of $21,200 ($2.00 per hour). Actual costs for October in producing 4,700 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.)
(b) Compute the total overhead variance.
Explanation / Answer
(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 250.) Total materials variance $ -4388 Unfavorable Materials price variance $ -3415 Unfavorable Materials quantity variance $ -972 Unfavorable Total labor variance $ -635 Unfavorable Labor price variance $ -2315 Unfavorable Labor quantity variance $ 1680 Favorable (b) Compute the total overhead variance. Total overhead variance $ -2,070 Unfavorable Total Budgeted Overheads For 5,300 Units Variable Overheads 84800 $ 8 per labor hour Fixed Overheads 21200 $ 2 per labor hour For 4,700 Units Variable Overheads 75200 $ 8 per labor hour Fixed Overheads 18800 $ 2 per labor hour