Question

You have been given the following information about the production of Usher Co., and are asked to provide the plant manager with information for a meeting with the vice president of operations.

		Standard Cost Card
Direct materials (8 pounds at $5 per pound)		$40.00
Direct labor (0.70 hours at $10)		7.00
Variable overhead (0.70 hours at $3 per hour)		2.10
Fixed overhead (0.70 hours at $7 per hour)		4.90
		$54.00

The following is a variance report for the most recent period of operations.

				Variances
Costs		Total Standard Cost		Price			Quantity
Direct materials		$412,000		$8,434	F		$9,700	U
Direct labor		72,100		4,704	U		6,300	U

How many units were produced during the period?

Number of units

eTextbook and Media

  

  

How many pounds of raw materials were purchased and used during the period?

Raw material

pounds

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What was the actual cost per pound of raw materials? (Round answer to 2 decimal places, e.g. 1.25.)

Actual cost per pound of raw materials

$

/lb

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How many actual direct labor hours were worked during the period?

Actual direct labor hours

hours

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What was the actual rate paid per direct labor hour? (Round answer to 2 decimal places, e.g. 1.25.)

Actual rate paid per direct labor hour

$

/hr

Answer 1

(a). How many units were produced during the period?

Answer:-

Units produced

= Total standard Cost / standard Cost per unit

= $412,000 / $40

= 10,300 units.

(b)        AQ = [(SQ X SP) Quantity variance] ÷ SP

AQ = ($412,000 + $9,700) ÷ $5.00 per lb = 84,340 pounds

(c)        AP = [(AQ X SP) Price variance] ÷ AQ

AP = [(84,340 X $5) - $8,434] = $413,266 ÷ 84,340 lb = $4.9/lb

(d)       AH = [(SH X SR) Quantity variance] ÷ SR

AH = ($72,100 + $6,300) ÷ $10.00/hr = 7,840 hours

(e)        AR = [(AH X SR) Price variance] ÷ AH

AP = [(7,840 X $10) + $4,704] = $83,104 ÷ 7,840 hr = $10.60/hr

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