Pato Company produces leather sandals. The company employs a standard costing sy
ID: 2510196 • 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 actual variable overhead cost incurred by Pato Company in May.
Explanation / Answer
Production Costs: Standard Qty Standard Price Total Direct Material 2.00 9.27 18.54 DM Price Variance 7100 Direct Labor 2.50 12.00 30.00 (SP-AP)Actual Qty 7100 Variable FOH 2.50 10.80 27.00 (SP-8.75)*13600 7100 Total 75.54 13600SP-119000 7100 13600SP 126100 Actual Units 6000 SP 9.27 Production Costs: Standard Qty Standard Price Total DL Price Variance -29500 Direct Material 12,000 9.27 1,11,265 (SP-AP)Actual Hours -29500 Direct Labor 15,000 12.00 1,80,000 (12-AP)AH -29500 Variable FOH 15,000 10.80 1,62,000 (12AH)-(AP*AH) -29500 Total 4,53,265 (12AH)-(171100) -29500 12AH 141600 AH 11800 Production Costs: Actual Qty Actual Price Total Direct Material 13,600 8.75 1,19,000 Direct Labor 11,800 14.50 1,71,100 Total DL Variance 8900 Variable FOH 11,800 10.59 1,25,000 (Standard Cost-Actual Cost) 8900 Total 4,15,100 (Standard Cost-171100) 8900 (30*Actual Units)-171100) 8900 (30*Actual Units) 180000 Actual Units 6000 Direct Material Used 13,600 Closing Material 600 Total 14,200 Variable OH Spending Variance 2440 (SP-AP)Actual Hours 2440 Material Purchased 124250 (10.80-AP)11800 2440 127440-11800AP 2440 Per Unit Cost 8.75 125000 11800AP AP 10.59 Variable OH Efficiency Variance 34560 (SQ-AQ)Standard Price 34560 (15000-11800)SP 34560 3200SP 34560 SP 10.80