Question

Pato Company produces leather sandals. The company employs a standard costing
system and has the following standards in order to produce one pair of sandals:

                    standard quantity              standard price
direct materials     2 leather strips              ?? per strip
direct labor         2.5 hours                     $12 per hour
variable overhead    2.5 hours                     ?? per hour

During May, Pato purchased leather strips at a total cost of $124,250 and had
direct labor totaling $171,100. During May, Pato used 13,600 leather strips in
the production of sandals. Pato had no beginning inventories of any type for
May. At May 31, Pato had 600 leather strips remaining in its direct materials
inventory.

Pato Company reported the following variances for May:

  Direct material price variance ..............  $7,100 favorable
  Direct labor rate variance ..................  $29,500 unfavorable
  Total direct labor variance .................  $8,900 favorable
  Variable overhead spending variance .........  $2,440 favorable
  Variable overhead efficiency variance .......  $34,560 favorable

Calculate the number of pairs of sandals produced by Pato Company in May.

Answer 1

Total direct labor variance = Standard Labor cost - Actual labor cost

$8,900 = Standard labor cost - $171,100

Standard labor cost = $8,900+$171,100 = $180,000

Standard hours for actual production in May = Standard labor cost/Std labor rate per hour

= $180,000/$12 = 15,000 hours

Actual Production of pairs of sandals in May = Standard hrs for actual production in May/Std hr required per pair

= 15,000 hours/2.50 hour per pair = 6,000 pairs of sandals

Therefore the number of pairs of sandals produced by Pato Company in May is 6,000 pairs.