Costello Corporation manufactures a single product. The standard cost per unit o
ID: 2469912 • 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 $16 per direct labor hour ($24.00 ÷ 1.50). It was computed from a master manufacturing overhead budget based on normal production of 7,950 direct labor hours (5,300 units) for the month. The master budget showed total variable costs of $47,700 ($6.00 per hour) and total fixed overhead costs of $79,500 ($10.00 per hour). Actual costs for October in producing 3,600 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.
Material and labour variances are computed as under:
Direct materials—2 pound plastic at $6.05 per pound 12.1 Direct labor—1.50 hours at $12.00 per hour 18 Variable manufacturing overhead 9 32400 Fixed manufacturing overhead 15 Total standard cost per unit $54.10 Direct materials (7,340 pounds) 45214 6.16 Direct labor (5,200 hours) 64,116 12.33 Variable overhead 62,120 17.26 Fixed overhead 26,200 7.28 Total manufacturing costs $197,650 a. Material Price Variance SP-AP*AQ (6.05-6.16)*7340 807.4 U Material Qty variance (AQ-SQ)*SP (7,340-7,200)*6.05 847 U Material Variance AC-SC 7340*6.16 - 7,200*6.05 1654.4 U Labor rate variance (SR-AR)*AH (12-12.33)*5,200 1716 U Labor qty variance (SH-AH)*SR (5,400-5,200)12 2,400 F Labor Cost varaince AC-SC 5,200*12.33- 5,400*12 684 F b. Variable overhead variance Actual - Standarad 62120-32400 29,720 U Fixed overhead variance Actual - Standarad 26,200-79,500 53300 F