Pato Company produces leather sandals. The company employs a standard costing sy
ID: 2510909 • 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 sandal standard quantit standard price direct materials direct Labor variable overhead 2 leather strip:s 2.5 hours 2.5 hours ?? per strip $12 per hour ?? 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 i the production of sanda Ls. 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 . . . . . . . . . . . . . Direct labor rate variance . . . . . . .. $7,100 favorable $29,500 unfavorable $8,900 favorable $2,440 favorable $34,560 favorable Variable overhead spending variance .. . . . . . . . Variable overhead efficiency variance . . . . . . Calculate the actual variable overhead cost incurred by Pato Company in MayExplanation / Answer
1)Labor price variance = Actual Hour ( SR-AR) -29500 = (Acutal Hour *SR)-(Actual Hour *AR) -29500=(Actual Hour*12)-171100 Actual Hour=11800 Hour Total Direct Labour variance = std. Labour cost-actual Labour cost $8900 = Std. cost-$171100 Std. cost = $8900+$171100 Std. Labour cost = $180000 2.) Std. Labour cost = Standrad Hour for Actual production *SR =$180000=SH*$12 SH = $180000/12 SH = 15000 hours 3.) SH = SH per unit*no. of pair sandals 15000 = 2.5*no. of pair sandals No. of pair sandals = 15000/2.5= 6000 Pair of Sandal Variable Overhead efficiency Variance= (SH for Actual Unit-Actual Hour)SR $34560 =(15000-11800)SR SR=$10.80 Variable Overhead Spending Variance= (SR-AR)Ahour $2440=($10.80-AR}*11800 $0.2068=$10.80-AR AR=$10.59 Actual Variable Overhead Cost incurred ( $10.59*11800)=$124962