Stromski 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 $ 7.00Direct 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 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 $ 37,230
- Direct labor 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.