Highland Company produces a lightweight backpack that is popular with college st
ID: 2592397 • 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 Standard Cost Direct materials Direct labor $5.00 per yard per direct $ 2 labor-hour Variable manufacturing overhead Total standard cost per unit Overhead is applied to production on the basis of direct labor-hours. During March, 440 backpacks were manufactured and sold Selected information relating to the month's production is given below Variable Materials Used $ 9,460 $ 8,048 Direct Manufacturing Labor $6,468 Overhead $1,232 $1,641 Total standard cost allowed* Actual costs incurred Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance $ 600 U For the month's production The following additional information is available for March's productionExplanation / Answer
1. Std. cost/backpack Direct materials 9460/440= 21.5 Direct labor 6468/440= 14.7 VMOH 1232/440= 2.8 1. Total Std. cost/backpack 39 Diff. bet. Std. & actual cost per backpack in Mar.(given) 0.20 F 2. So. Actual cost /backpack 39-0.2 38.8 3. Std.d/m cost per back pack Total std.cost/Total backpacks mfd. 9460/440= 21.5 SQ of D/M per back pack (in Yards) 21.5/5= 4.3 4. Total Material cost variance=Std. costs allowed-Actual costs incurred=9460-8048= 1412 F Material Quantity Variance= 600 U (Given) Total MCV= MQV+ MPV ie. 1412 F=600 U+ MPV So, Material Price Variance= 1412 F+ 600 U= 2012 F 5 STD. VMOH /back pack--- 1232/440 2.8 So,Std. D/L hrs.reqd. per backpack = 2.8/2= 1.4 5. Std. D/L rate/hr.= $ 14.7/1.4 hrs. 10.5 6 Actual cost/backpack ---(per answer:2) 38.8 Total actual cost for 440 backpacks=440*38.8= 17072 Actual D/M costs incurred 8048 Actual VMOH costs incurred 1641 Total 9689 So, Actual D/L costs incurred= 17072-9689= 7383 Actual d/l hrs. 690 So, Actual D/l rate/hr.=7383/690= 10.7 DL Rate Variance =(SRAR )*Actual hrs. DL Rate Variance =(10.510.7 )*690 138 UF DL Eff.V=(Std.hrs-Actual hrs.)*Std.Rate/hr. DL Eff.V=((1.4*440)-690)*10.5 777 U Verification Total D/L Cost Variance=DLRV+DLEV (7383-6468)=915 U=138 U+ 777 U= 915 U 7 Actual VMOH costs incurred 1641 Actual D/L hrs. 690 VMOH cost /Hr.= 1641/690= 2.3783 VMOH Rate Variance =(SRAR )*Actual hrs. VMOH Rate Variance =(1.42.3783 )*690 675 U VMOH Eff.V=(Std.hrs-Actual hrs.)*Std.Rate/hr. VMOH Eff.V=((2*440)-690)*1.4 266 F Verification Total VMOH Cost Variance=VMOH RV+VMOH EV (1232-1641)=409 U=675 U+266 F= 409 U 8. Std. cost card for 1 backpack Std. qty./Hrs. Std. Price/Rate Std. Cost Direct materials 4.3 5 21.5 Direvt labor 1.4 10.5 14.7 VMOH 1.4 2 2.8 Total std. cost/unit 39