FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:**Standard Cost and Manufacturing Cost Analysis**
**Standard Cost Per Unit:**
- **Direct materials—1 pound plastic at $6 per pound:** $6.00
- **Direct labor—2.50 hours at $11.35 per hour:** $28.38
- **Variable manufacturing overhead:** $17.50
- **Fixed manufacturing overhead:** $7.50
**Total standard cost per unit: $59.38**
**Manufacturing Overhead Rate Calculation:**
The predetermined manufacturing overhead rate is $10 per direct labor hour ($25.00 ÷ 2.50). It was computed from a master manufacturing overhead budget based on normal production of 14,500 direct labor hours (5,800 units) for the month. The master budget showed total variable costs of $101,500 ($7.00 per hour) and total fixed overhead costs of $43,500 ($3.00 per hour).
**Actual Costs for October (4,600 units produced):**
- **Direct materials (4,710 pounds):** $29,202
- **Direct labor (11,400 hours):** $132,810
- **Variable overhead:** $85,098
- **Fixed overhead:** $32,202
**Total manufacturing costs: $279,312**
### Additional Information:
The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. You are required to compute all of the materials and labor variances and total overhead variance based on the provided data.
### Instructions for Students:
1. **Analyze the cost per unit:** Compare the actual costs against the standard costs to determine variances.
2. **Understand variance analysis:** Variance analysis is crucial for cost control and efficiency improvement in manufacturing processes.
3. **Use the provided data:**
- **Direct Materials Price Variance**
- **Direct Materials Usage Variance**
- **Direct Labor Rate Variance**
- **Direct Labor Efficiency Variance**
- **Variable Overhead Spending Variance**
- **Variable Overhead Efficiency Variance**
- **Fixed Overhead Spending Variance**
- **Fixed Overhead Volume Variance**
4. **Interpret the results:** Use these variances to find areas where the manufacturing process can be optimized.
This educational resource is designed to help students grasp the essential concepts of cost accounting and variance analysis in a manufacturing setup.
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