Problem 11-1A Rogen Corporation manufactures a single product. The standard cost
ID: 2524912 • Letter: P
Question
Problem 11-1A
Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.
The predetermined manufacturing overhead rate is $12 per direct labor hour ($18.00 ÷ 1.50). It was computed from a master manufacturing overhead budget based on normal production of 8,850 direct labor hours (5,900 units) for the month. The master budget showed total variable costs of $66,375 ($7.50 per hour) and total fixed overhead costs of $39,825 ($4.50 per hour). Actual costs for October in producing 4,700 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. 125.)
(b)
Compute the total overhead variance.
Problem 11-1A
Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.
Explanation / Answer
Solution a:
Standard quantity of material for actual production = 4700*1 = 4700 pound
Actual quantity of material = 4890 pound
Standard price of material = $7
Actual price of material = $35,208 / 4890 = $7.20
Material price variance = (SP - AP) * AQ = ($7 - $7.20) * 4890 = $978 U
Material quantity variance = (SQ - AQ) * SR = (4700 - 4890) * $7 = $1,330 U
Total material variance = Material price variance + Material quantity variance = $978 U + $1,330 U = $2,308 U
Standard hours of direct labor = 4700 * 1.50 = 7050 hours
Standard rate of direct labor = $11.10
Actual hours of direct labor = 6900
Actual rate of direct labor = $78,660 / 6900 = $11.40 per hour
Direct labor rate variance = (SR - AR) * AH = ($11.10 - $11.40) * 6900 = $2,070 U
Direct labor efficiency variance = (SH - AH) * SR = (7050 - 6900) * $11.10 = $1,665 F
Total direct labor variance = Direct labor rate variance + Direct labor efficiency variance
= $2,070 U + $1,665F = $405 U
Solution b:
Actual manufacturing overhead = Variable overhead + Fixed overhead
= $62,602 + $24,098 = $86,700
Manufacturing overhead applied = (Standard hours for actual production * Standard rate)
= (4700*1.50 * $12) = $84,600
Total overhead variance = Manufacturing overhead applied - Actual manufacturing overhead
= $84,600 - $86,700
= $2,100 U