Highland Company produces a lightweight backpack that is popular with college st
ID: 2558971 • Letter: H
Question
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below Standard Quantity or Hours Standard Price or Rate Standarod Cost s 2 Direct materials Direct labor $4.00 per yard Variable manufacturing overhead Total standard coat per unit per direat S 2 labor-hour $ 2 Overhead is applied to production on the basis of direct labor-hours. During March, 700 backpack? were manufactured and sold. Selected information relating to the month's production is given below Variable Materials Used Direct Manufacturing Labor Overhead $2,100 $4, 032 Total standard cost allowed Actual costs ineurred Materiale price variance Materiala quantity variance Labor rate variance Labor effieiency variance Variable overhead rate variance Variable overhead efficiency variance 11,200$10,50 $ 8,925 700 For the month's production.Explanation / Answer
1) standard cost of a single backpack is $34
total standard cost = standard direct material + direct labor + varaible manufacturing overhead / total number of backpack produced
= $11200 + $10500 + $2100 / 700 = $34.
2) Actual cost per backpack is $33.66
The difference between standard and actual cost per backpack is $0.34 favourable
so the actual cost is less than standard cost = $34 - $0.34 = $33.66
3) Standard yard of material required per backpack
total cost of material to produce 700 backpack = $11200
cost of material to produce per backpack = $11200 / 700 = $16
standard price per yard = $4
so, the standard yard required for per backpack = $16 / $4 = 4 yard
4) Material price variance = Actual quantity (standard price - actual price)
actual quantity = ?
standard price = $4 per yard
actual price = ?
to find actual quantity:
material quantity variance = standard price (actual quantity - standard quantity)
in this problem the material quantity varience is $700 U
standard price = $4
standard quantity = 4 yard * 700 backpack = 2800 yards
$700U = $4 (actual quantity - 2800)
$700U = $11200 - $4AQ
$4AQ = $11200+$700
$4AQ = $11900
AQ = $11900 / $4
Actual Quantity = 2975 yards
actual price per yard = $8925 / 2975
= $3
Material price varience = 2975 ($4 - $3)
= $2975 favorable
5) standard direct labor rate per hour
standard direct labor cost = $10500
total direct labor = variable manufacturing cost / rate per direct labor
= $2100 / $2
= 1050 hours
standard direct labor rate per hour = $10500 / 1050
= $10
6) labor rate varience = Actual Hour (standard rate - actual rate)
= 1050 ($10 - $10.1)
= $105 unfavourable
labor efficiency varience = standard rate (actual hour - standard hour)
= $10 (1050-1050)
= $0 (the actual and standard hour are same, so there is no varience )
7) variable overhead rate varience = actual hour (standard rate - actual rate)
= 1050 ($2 - $3.84)
= $1932 unfavorable
actual rate = $4032 / 1050
= $3.84
Variable over head efficiency varience = standard rate(actual hour - standard hour)
= $2 (1050 - 1050)
= $0