Question

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system: (1) Standard Quantity or Hours Inputs Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit (2) Standard Price or Rate $16.10 per pound $15.50 per hour $ 9.40 per hour Standard Cost (1) X (2) $ 37.03 $ 15.50 $ 9.40 $ 61.93 1.00 hours Direct materials Direct labor Variable manufacturing overhead Total Variances Reported Standard Price Quantity or Cost* or Rate Efficiency $703,570 $ 13,253 F $ 32,200 U $294,500 $ 4,084 U $ 15,500 U $178,600 $ 4,100 F $ ? U *Applied to Work in Process during the period The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored. Required: 1. How many units were produced last period? 2. How many pounds of direct material were purchased and used in production? 3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.) 4. How many actual direct labor-hours were worked during the period? 5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places. 6. How much actual variable manufacturing overhead cost was incurred during the period? 1. Number of units produced Pounds of direct material purchased and used in production Actual cost per pound Actual direct labor-hours Actual rate per direct labor-hour Actual variable manufacturing overhead cost 5. 6.

Answer 1

Solution is as follows:

1)

1 No of Units Produced in last period: No. of units = Total Std. cost of Raw Material /Std. cost of Raw material per unit No. of units = $ 703,750 / $37.03 No. of units = 19,005 Units

2)

SP - Std. Price SQ - Std. Quantity AP - Actual Price AQ - Actual Quantity 2 Material Variances (1) (2) (3) SQ x SP AQ X AP AQ X SP Material Price Variance Material Quantity Variance (3) - (2) (1) - (3) 13253 F 32200 U SQ = No. of units X Std Qty per unit = 19000 x 2.3 = 43,700.00 (SQ x SP) - (AQ x SP) = 32200 U SP x (SQ-AQ = -32200 16.1 x (43700 - AQ = -32200 (43700 - AQ = -2000 AQ = 45700 No. of Direct materials purchased & used in production = 45700 pounds (AQ X SP) - (AQ x AP) = AQ X (SP-AP) = 45700 X (16.1 - AP) = (16.1 - AP) = AP = 13253 F 13253 F 13253 0.29 16.39 Actual Cost per pound (S) 16.30 per pounds

3)

4)

SH - Std. Hours SR - Std. rate AH- Actual Hours AR - Actual rate 2 Labour Variances (1) |(2) (3) SH X SR A HXAR AH X SR Labour Rate Variance Labour Efficiency Variance (3) - (2) (1) - (3) 4000 U 15500 U SH = No. of units X Std Hrs per unit = 19000 x 1 = 19,000 (SH X SR) - (AH X SR) = 15500 U SRX (SH - AH) = -15500 15.5x (19000 - AH) = -15500 19000 - AH = -1000 AH = 20000 Actual Direct Labour Hours | 20000 Hours (AH X SR) - (AH XAR) = 4000 U AH (SR - AR) = 4000 U 20000 x (15.5 - AR) = -4000 (15.5-AR) = -0.20 AR = 15.70 Actual rate paid per labour hour (S)= 1 15.7 per hour

3 Variable Manufacturing Overhead Variances (VMOH) Actual VMOH = Standard cost - Favourable Variance Actual VMOH = 178,600 - 4.100 Actual VMOH = $1,74,500