Rondello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials-1 pound plastic at $9.10 per pound $ 9.10
Direct labor-1.5 hours at $15.60 per hour 23.40
Variable manufacturing overhead 14.63
Fixed manufacturing overhead 4.88
Total standard cost per unit $52.01
The pre- evaluated manufacturing overhead rate is $13 per direct labor hour ($19.50 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 9,750 direct labor hours (6,500 units) for the month. The master budget showed net variable costs of $73,125 ($9.75 per hour) and net fixed overhead costs of $24,375 ($3.25 per hour). Real costs for October in producing 4,940 units were as given.
Direct materials (5,150 pounds) $48,874
Direct labor (7,000 hours) 113,750
Variable overhead 73,021
Fixed overhead 25,584
Total manufacturing costs $261,229
The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, thus, can be ignored.