Putnam Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials-1 pound plastic at $7.00 per pound $ 7.00
Direct labor-1.5 hours at $12.00 per hour 18.00
Variable manufacturing overhead 11.25
Fixed manufacturing overhead 3.75
Total standard cost per unit $40.00
The predetermined manufacturing overhead rate is $10 per direct labor hour ($15.00 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 7,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $56,250 ($7.50 per hour) and total fixed overhead costs of $18,750 ($2.50 per hour). Actual costs for October in producing 4,900 units were as follows.
Direct materials (5,100 pounds) $ 37,230
Direct labor (7,000 hours) 87,500
Variable overhead 56,170
Fixed overhead 19,680
Total manufacturing costs $200,580
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.
Hint: Compute variances.
Instructions:
Q1. Compute all of the materials and labor variances.
Q2. Compute the total overhead variance.