Pato Company produces leather sandals. The company employs a standard costing sy
ID: 2510194 • Letter: P
Question
Pato Company produces leather sandals. The company employs a standard costing system and has the following standards in order to produce one pair of sandals: standard quantity standard price direct materials 2 leather strips ?? per strip direct labor 2.5 hours $12 per hour variable overhead 2.5 hours ?? per hour During May, Pato purchased leather strips at a total cost of $124,250 and had direct labor totaling $171,100. During May, Pato used 13,600 leather strips in the production of sandals. Pato had no beginning inventories of any type for May. At May 31, Pato had 600 leather strips remaining in its direct materials inventory. Pato Company reported the following variances for May: Direct material price variance .............. $7,100 favorable Direct labor rate variance .................. $29,500 unfavorable Total direct labor variance ................. $8,900 favorable Variable overhead spending variance ......... $2,440 favorable Variable overhead efficiency variance ....... $34,560 favorable Calculate the number of pairs of sandals produced by Pato Company in May.
Explanation / Answer
Total direct labor variance = Standard Labor cost - Actual labor cost
$8,900 = Standard labor cost - $171,100
Standard labor cost = $8,900+$171,100 = $180,000
Standard hours for actual production in May = Standard labor cost/Std labor rate per hour
= $180,000/$12 = 15,000 hours
Actual Production of pairs of sandals in May = Standard hrs for actual production in May/Std hr required per pair
= 15,000 hours/2.50 hour per pair = 6,000 pairs of sandals
Therefore the number of pairs of sandals produced by Pato Company in May is 6,000 pairs.