Costello Corporation manufactures a single product. The
standard cost per unit of product is shown below.
Direct materials—1 pound plastic at $7.00 per pound $ 7.00
Direct labor—1.6 hours at $12.00 per hour 19.20
Variable manufacturing overhead 12.00
Fixed manufacturing overhead 4.00
Total standard cost per unit 42.20
The predetermined manufacturing overhead rate is $10 per
direct labor hour ($16.00 ÷ 1.6). It was computed from a master manufacturing
overhead budget based on normal production of 8,000 direct labor hours (5,000
units) for the month. The master budget showed total variable costs of $60,000
($7.50 per hour) and total fixed overhead costs of $20,000 ($2.50 per hour).
Actual costs for October in producing 4,900 units were as follows.
Direct materials (5,100 pounds) $ 36,720
Direct labor (7,500 hours) 93,750
Variable overhead 59,700
Fixed overhead 21,000
Total manufacturing costs 211,170
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.
Instructions
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.
(a) Total materials variance:
|
|
( AQ X AP )
(5,100 X $7.20)
$36,720 |
–
–
|
( SQ X SP )
(4,900
X $7.00)
$34,300 |
=
|
$2,420 U
|
Materials price variance:
|
|
( AQ X AP )
(5,100 X $7.20)
$36,720 |
–
–
|
( AQ X SP )
(5,100
X $7.00)
$35,700 |
=
|
$1,020 U
|
Materials quantity variance:
|
|
( AQ X SP )
(5,100 X $7.00)
$35,700 |
–
–
|
( SQ X SP )
(4,900
X $7.00)
$34,300 |
=
|
$1,400 U
|
Total labor variance:
|
|
( AH X AR )
(7,500 X $12.50)
$93,750 |
–
–
|
( SH X SR )
(7,840*
X $12.00)
$94,080 |
=
|
$330 F
|
*4,900
X 1.6
Labor price variance:
|
|
( AH X AR )
(7,500 X $12.50)
$93,750 |
–
–
|
( AH X SR )
(7,500
X $12.00)
$90,000 |
=
|
$3,750 U
|
Labor quantity variance:
|
|
( AH X SR )
(7,500 X $12.00)
$90,000 |
–
–
|
( SH X SR )
(7,840
X $12.00)
$94,080 |
=
|
$4,080 F
|
(b) Total overhead variance:
|
|
Actual
Overhead
($59,700 + $21,000)
$80,700
|
–
–
|
Overhead
Applied (7,840 X $10.00)
$78,400
|
=
|
$2,300 U
|
