Problem 11-6 XO-20 is an oil-based product used to remove rust on bolts and nuts
ID: 2471273 • Letter: P
Question
Problem 11-6
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.4-liter can of solution call for 0.78 liters of material and 4 hours of labor. (0.78 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.6. The standard cost per hour for labor is $13.80. Overhead is applied at the rate of $15.96 per can. Expected production is 8,300 cans with fixed overhead per year of $37,101 and variable overhead of $11.49 per unit (a 0.4-liter can).
During 2015, 7,800 cans were produced; 13,700 liters of material were purchased at a cost of $61,513; 10,090 liters of material were used in production. The cost of direct labor incurred in 2015 was $406,896, based on an average actual wage rate of $12.11 per hour. Actual overhead for 2015 was $127,000.
Determine the standard cost per unit. (Round answer to 2 decimal places, e.g. 15.25.)
Calculate material, labor, and overhead variances. (Round answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)
Explanation / Answer
Std qty of material 0.78 Litres cost per litre 2.6 DM cost per unit $2.03 per litre labor 4 hrs cost per hour 13.8 DM cost per unit $2.03 DL cost per unit 55.2 Overhead 15.96 Std cost per unit $73.19 Fixed overhead 37101 exp prod 8300 per unit 4.47 variable ovhds 11.49 Overhead applied 15.96 DM Price Variance = ( SP AP ) × AQ AP= 61,513/13,700 = 4.49 (2.6-4.49)*10090 -19070.1 U DM Quantity Variance = ( SQ AQ ) × SP ((7800*.78)-10090)*2.6 -10415.6 U DL Rate Variance = ( SR AR ) × AH AH= 406,896/12.11 33,600.00 AH (13.8-12.11)*33600 56,784.00 F DL Efficiency Variance = ( SH AH ) × SR ((7,800*4)-33600)*13.8 -33120 U Actual overhead 127000 Std overhead(15.96*7800) 124488 Variance 2512 U