Problem
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.77 liters of material and 4 hours of labor. (0.77 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $12.60. Overhead is applied at the rate of $15.11 per can. Expected production is 7,600 cans with fixed overhead per year of $34,504 and variable overhead of $10.57 per unit (a 0.5-liter can).
During 2015, 7,840 cans were produced; 13,900 liters of material were purchased at a cost of $65,747; 10,120 liters of material were used in production. The cost of direct labor incurred in 2015 was $372,980, based on an average actual wage rate of $10.97 per hour. Actual overhead for 2015 was $128,000.
Determine the standard cost per unit.
Calculate material, labor, and overhead variances.