The standard cost card for the single product manufactured by Cutter, Inc., is given below:
Inputs (1)
Standard
Quantity
or Hours (2)
Standard
Price
or Rate Standard
Cost
(1) Ã (2) Direct materials 4.2 yards $ 5.00 per yard $ 21.00 Direct labor 0.8 hours $ 15.00 per hour 12.00 Variable overhead 0.8 hours $ 1.50 per hour 1.20 Fixed overhead 0.8 hours $ 5.00 per hour 4.00 Total standard cost per unit $ 38.20
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 8,760 hours and manufactured 10,700 units of product. Selected data relating to the companyâs fixed manufacturing overhead cost for the year are shown below:
Actual Fixed Overhead Budgeted Fixed Overhead Fixed Overhead
Applied to
Work in Process $42,000 ? ? hours à $? per hour
= $? Budget variance,
$? Volume variance,
$1,800 F
Required:
1. What were the standard hours allowed for the yearâs production?
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?
The standard cost card for the single product manufactured by Cutter, Inc., is given below:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 4.2 yards | $ | 5.00 | per yard | $ | 21.00 | |
| Direct labor | 0.8 hours | $ | 15.00 | per hour | 12.00 | ||
| Variable overhead | 0.8 hours | $ | 1.50 | per hour | 1.20 | ||
| Fixed overhead | 0.8 hours | $ | 5.00 | per hour | 4.00 | ||
| Total standard cost per unit | $ | 38.20 | |||||
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 8,760 hours and manufactured 10,700 units of product. Selected data relating to the companyâs fixed manufacturing overhead cost for the year are shown below:
| Actual Fixed Overhead | Budgeted Fixed Overhead | Fixed Overhead Applied to Work in Process | |||||
| $42,000 | ? | ? hours à $? per hour = $? | |||||
| Budget variance, $? | Volume variance, $1,800 F | ||||||
Required:
1. What were the standard hours allowed for the yearâs production?
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?
Related questions
Herzog Clothiers manufactures women's business suits. Thecompany uses a standard cost accounting system. In March 2012,15,700 suits were made. The following standard and actual cost dataapplied to the month of March when normal capacity was 20,000direct labor hours. All materials purchased were used inproduction.
|
Overhead is applied on the basis of direct labor hours. Atnormal capacity, budgeted fixed overhead costs were $126,000, andbudgeted variable overhead costs were $60,000.
Instructions
| (a) | Compute the total, price, and quantity variances for (1)materials and (2) labor. (a) MPV $30,400 U |
| (b) | Compute the total overhead variance. |
| (c) | Which of the materials and labor variances should beinvestigated if management considers a variance of more than 5%from standard to be significant? |
ABC Dress Shop produces high quality formal dresses. In July2018 they produced 16,000 dresses. For the month of July thefollowing standard and actual cost data are available. The normalmonthly capacity of the company is 40,000 direct labor hours. Allmaterial purchased in July was used in July production.
Standard per Dress | Actual | |
Direct materials | 5.0 yards @ $8.50 per yard | $643,250 for 83,000 yards |
Direct labor | 2.0 hours @ $12.00 per hour | $425,000 for 34,000 hours |
Overhead | hours @ $5.15 per hour (fixed $3.25; variable $1.90) | $125,000 fixed overhead $49,000 variable overhead |
Overhead is applied on the basis of direct labor hours. Atnormal capacity, budgeted fixed overhead costs are $130,000 permonth and budgeted variable overhead costs are $76,000 permonth.
| Variance | Standard | Actual | Variance | % Variance | >5% | |
| Direct Materials Price | 136000 | 124000 | 12000 | 8.82% | Yes | Investiage |
| Direct Materials Quantity | 680000 | 705500 | 25500 | 3.75% | No | |
| Direct Labor Rate | 408000 | 425000 | 17000 | 4.17% | No | |
| Direct Labor Efficiency | 384000 | 408000 | 24000 | 6.25% | Yes | Investiage |
| Variable OverheadSpending | 64600 | 49000 | 15600 | 24.15% | Yes | Investiage |
| Variable OverheadEfficiency | 64600 | 63080 | 1520 | 2.35% | No | |
| Fixed Overhead Spending | 130000 | 125000 | 5000 | 3.85% | No | |
| Fixed Overhead ProductionVolume | 130000 | 110500 | 19500 | 15.00% | Yes | Investiage |
QUESTION: Provide a discussion of thetradeoffs that might exist between the direct material and directlabor variances.
Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 6 | pounds | $ | 3 | per pound | $ | 18.00 |
| Direct labor | 0.8 | hours | $ | 15 | per hour | $ | 12.00 |
| Variable manufacturing overhead | 0.8 | hours | $ | 3 | per hour | $ | 2.40 |
| Total standard cost per unit | $ | 32.40 | |||||
| Total | Variances Reported | |||||||
| Standard Cost* | Price or Rate | Quantity or Efficiency | ||||||
| Direct materials | $ | 405,000 | $ | 6,900 | F | $ | 9,000 | U |
| Direct labor | $ | 270,000 | $ | 14,550 | U | $ | 21,000 | U |
| Variable manufacturing overhead | $ | 54,000 | $ | 1,300 | F | $ | ? | U |
*Applied to Work in Process during the period.
The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.
Required:
1. How many units were produced last period?
2. How many pounds of direct material were purchased and used in production?
3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)
4. How many actual direct labor-hours were worked during the period?
5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)
6. How much actual variable manufacturing overhead cost was incurred during the period?
Reference links
Using Standard CostsâDirect Labor Variancesopens in a new window
Using Standard CostsâDirect Materials Variances
