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 Standard Price Standard Quantity Cost or Rate or Hours $4.00 per yard Direct materials $ ? Direct labor ? ? Variable manufacturing overhead per direct 2 labor-hour ? $ Total standard cost per unit Overhead is applied to production on the basis of direct labor-hours. During March, 420 backpacks were manufactured and sold. Selected information relating to the month's production is given below: Variable Manufacturing Overhead Materials Direct Used Labor $1,092 $1,407 Total standard cost allowed* $6,720 5,355 4,368 Actual costs incurred Materials price variance Materials quantity variance Labor rate variance $ 420 U ? Labor efficiency variance Variable overhead rate variance ? Variable overhead efficiency variance "For the month's production

Answer 1

1)	Standard cost for September production
	Materials				6,720
	Direct labor				4,368
	Variable manufacturing overhead				1,092
	total standard cost		(a)		12,180
	number of backpacks produced			(b)	420
	standard cost of single backpack a/b				29	answer
2)	Standard cost of a single backpack(above)				29
	Deduct Fav variance between std and actual cost				-0.15
	Actual cost per backpack				28.85
3)	total standard cost of materials used (a)				6,720
	number of backpacks produced			(b)	420
	standard material cost per backpacka/b				16
	standard material cost per backpack/standard material cost per yard
	16/4	=	$4	yards per backpack
4)	standard cost of material used				6,720
	actual cost of materials used				5,355
	Total variance				1,365	F
	price variance				1,785	F
	Quantity variance				420	U	(given)
	total variance				1,365	F
5)	Std VMOH cost				1,092
	std VMOH rate per direct labor hr				2		(given)
	Standard direct labor hours				546
	total std direct labor cost /total standard DLH's
	4,368	/	546	=	8	per DLH	answer
6)	Actual cost per backpack produced				28.85
	number of backpacks produced				420
	total actual cost of production					12117
	less:Actual cost of materials					-5,355
	Actual cost of variable mfg overhead					-1,407
	actual cost of direct labor					5355
	direct labor rate variance
	(AH*AR - SR*AH)
	(5355- 630*8(
	315	U
	Direct labor efficiency variance
	(AH-SH)*SR
	(630-546)*8
	672	U
7)	variable overhead rate variance
	(AH*AR - SR*AH)
	1,407	-	630*2
	147	U
	variable overhead efficiency variance
	(AH-SH)*SR
	(630-546)*2
	168	U
			SQ or	SP/SR	standard
8)			SH		cost
	Direct materials		$4	4	16
	Direct labor		1.3	8	10.4
	VMOH		1.3	2	2.6
	total standard cost per backpack				29