Exercise 1 - Kimm Company has gathered the following information about its product.
Direct materials: Each unit of product contains 3.40 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.60 pounds. Materials cost $2 per pound, but Kimm always takes the 3.45% cash discount all of its suppliers offer. Freight costs average $0.26 per pound.
Direct labor. Each unit requires 2.30 hours of labor. Setup, cleanup, and downtime average 0.29 hours per unit. The average hourly pay rate of Kimm's employees is $11.00. Payroll taxes and fringe benefits are an additional $2.60 per hour.
Manufacturing overhead. Overhead is applied at a rate of $4.30 per direct labor hour.
Compute Kimm's total standard cost per unit.
Exercise 2 - Lewis Company's standard labor cost of producing one unit of Product DD is 3.40 hours at the rate of $12.00 per hour. During August, 42,800 hours of labor are incurred at a cost of $12.16 per hour to produce 12,400 units of Product DD.
(a) Compute the total labor variance.
(b) Compute the labor price and quantity variances.
(c) Compute the labor price and quantity variances, assuming the standard is 3.71 hours of direct labor at $12.34 per hour.
Exercise 3 - Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
|
Direct materials-3 pound plastic at $6.64 per pound
|
$19.92
|
|
Direct labor-1.50 hours at $12.00 per hour
|
18.00
|
|
Variable manufacturing overhead
|
9.00
|
|
Fixed manufacturing overhead
|
12.00
|
|
Total standard cost per unit
|
$58.92
|
The predetermined manufacturing overhead rate is $14 per direct labor hour ($21.00 ÷ 1.50). It was computed from a master manufacturing overhead budget based on normal production of 7,650 direct labor hours (5,100 units) for the month. The master budget showed total variable costs of $45,900 ($6.00 per hour) and total fixed overhead costs of $61,200 ($8.00 per hour). Actual costs for October in producing 4,100 units were as follows.
|
Direct materials (12,490 pounds)
|
$ 84,432
|
|
Direct labor (6,000 hours)
|
74,340
|
|
Variable overhead
|
66,037
|
|
Fixed overhead
|
21,903
|
|
Total manufacturing costs
|
$246,712
|
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.
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.