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

?

$

6.00

per yard

$

?

Direct labor

?

?

?

Variable manufacturing overhead

?

$

2

per direct labor-hour

?

Total standard cost per unit

$

?

Overhead is applied to production on the basis of direct labor-hours. During March, 760 backpacks were manufactured and sold. Selected information relating to the month’s production is given below:

	Materials Used			Direct Labor			Variable Manufacturing Overhead
Total standard cost allowed*	$	18,240		$	15,808		$	2,432
Actual costs incurred	$	17,125			?		$	4,345
Materials price variance		?
Materials quantity variance	$	2,310	U
Labor rate variance					?
Labor efficiency variance					?
Variable overhead rate variance								?
Variable overhead efficiency variance								?

*For the month's production.

The following additional information is available for March’s production:

Actual direct labor-hours		1,140
Difference between standard and actual cost per backpack produced during March	$	0.10	F
Required: Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements. 1. What is the standard cost of a single backpack? 2. What was the actual cost per backpack produced during March? 3. How many yards of material are required at standard per backpack? 4. What was the materials price variance for March if there were no beginning or ending inventories of materials?

Answer 1

Solution 1:

Standard cost of 760 backpack produced = $18,240 + $15,808 + $2,432 = $36,480

Stadard cost of a single back pack = $36,480 / 760 = $48 per backpack

Solution 2:

Difference between standard cost and actual cost per backpack = $0.10 F

Actual cost per backpack = $48 - $0.10 = $47.90 per backpack

Solution 3:

Standard cost of material used for actual production = $18,240

Standard price of material = $6 per yard

Total standard material for actual prodcution = $18,240 / $6 = 3040 yard

Material required as per standard per back pack = 3040 /760 = 4 yard per backpack

Solution 4:

Material price variance = Total material variance - Material quantity variance

Total material cost variance = $18,240 - $17,125 = $1,115 F

Material quantity variance = $2,310 U

Material price variance = $1,115 F - $2,310 U = $3,425 F