Road Ready Tire Co. manufactures automobile tires. Standard cost and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 5,200 tires were as follows:
- Standard Cost Actual costs
- Direct materials 71,000 lbs. @ 5.10 70,600 lbs. @ 5.00
- Direct labor 1,300 hrs. @ 17.50 1,330 hrs. @ 17.80
- Factory overhead Rates per direct labor hr,
- based on 100% of normal capacity of 1,350 direct labor hrs.
- Variable cost 3.10 4,000 Variable cost
- Fixed cost 4.90 6,615 Fixed cost
- Each tire requires 0.25 hour of direct labor.