Question

Check my work 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 Standard Price or Rate $4.50 per yard Standard or Hours Direct naterials Direct labor Cost 2 ped Variable manufacturing overhead Total standard cost per unit $ 2 per direct labor-hour ok Overhead is applied to production on the basis of direct labor-hours. During March, 530 backpacks were manufactured and sold. Selected information relating to the month's production is given below ences Variable Manufacturing Materials Used $ 9,540 $ 8,645 Direct Labor $5,936 overhead $1,404 1,690 Total standard cost allowed Actual costs incurred Materials price varianoe Materials quantity variance Labor rate variance $ 1,575 U Labor efficiency varianoe Variable overhead rate variance Variable overhead efficiency variance For the month's production. The following additional information is available for March's production:

Answer 1

Solution 1:

Computation of Standard cost of a Single Backpack
Standard cost for March Production
Materials	$9,540
Direct Labor	$5,936
Variable Manufacturing Overhead	$1,484
Total Standard Cost	$16,960
Number of Backpacks Produced	530
Standard cost of a single Backpack	$32.00

Solution 2:

Computation of Actual cost per Backpack
Standard cost of a single Backpack	$32.00
Less: Difference Between Standard and actual Cost	$0.20
Actual Cost per Backpack	$31.80

Solution 3:

Computation of Number of yards at standard per Backpack
Total Standard cost of materials allowed during march	$9,540
/Number of Backpacks Produced during march	530
Standard material cost per Backpack	$18.00
/Standard material cost per yard	$4.50
Number of yards per Backpack	4.0

Solution 4:

Material price variance = Total material variance - Material quantity variance

Total material cost variance = $9540 - $8645 = $1365 F

Material quantity variance = $1575 U

Material price variance = $895 F - ($1575 U) = $2470 F

Material Price Variance	$2,470	F
Material Quantity Variance	$1,575	U
Spending Variance	$895	F

Solution 5:

Computation of standard Direct labor rate per hour
Standard Variable manufacturing overhead cost	$1,484
Standard Variable manufacturing overhead rate per hour	$2
Standard Direct labor hours for March	742
Standard Direct labor Cost for march	$5,936
Standard direct labor rate per hour	$8.00

Solution 6:

Total actual cost of backpack produced = 530* $31.80 = $16,854

Direct labor cost incurred = $16854 - $8645 - $1690 = $6519

Actual direct labor hours = 795 hours

Actual rate of Direct labor = $6519 / 795 = $8.20 per hour

Direct labor rate variance = (SR - AR) * AH = ($8.00 - $8.20) *795 = $159 U

Direct labor efficiency variance = (SH - AH) * SR = (742- 795) * $8.00 = $424 U

Solution 7:

Actual rate of variable overhead = $1690/795 = $2.125786 per hour

Variable overhead rate variance = (SR - AR) * AH = ($2 - $2.125786) *795 = $100 U

Variable overhead efficiency variance = (SH - AH) * SR = (742 - 795) * $2 = $106 U

Solution 8:

Standard cost Card - Highland Company
	Standard Quantity or Hours		Standard price or rate		Standard Cost
Direct material	4	yards	$4.50	Per Yard	$18.00
Direct labor (742/530)	1.4	hours	$8.00	Per DLH	$11.20
Variable overhead	1.4	hours	$2.00	Per DLH	$2.80
Standard cost per unit					$32.00