manufactures two staplers, small and regular. The standard quantities of labor and materials per unit for the year are Small Regular Direct materials (oz.) 6.0 10.00 Direct labor (hrs.) 0.1 0.15 The standard price paid per pound of direct materials is P1.60. The standard rate for the labor is P8. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is given below: Budgeted fixed overhead P360,000 Budgeted variable overhead 480,000 The company expects to work 12,000 direct labor during the year, standard overhead rates are computed using this activity level. For every small stapler produced, the company produces data for the year are: Units produced: small staplers, 35,000; regular staplers, 70,000 Direct materials purchased and used: 56,000 pounds at P1.55: 13,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending raw materials inventories. Direct labor: 14,800 hours: 3,600 hours for small stapler, and 11,200 hours for the regular. Total cost of labor: P114,700 Variable overhead: P607,500 Fixed overhead: P350,000 REQUIRE: Prepare a standard cost sheet showing the unit costs for each product. Compute the materials price and usage variance for each product Compute the labor rate an deficiency variance for each product Compute the variances for fixed and variable overhead.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
. manufactures two staplers, small and regular. The standard quantities of labor and materials per unit for the year are
Small Regular
Direct materials (oz.) 6.0 10.00
Direct labor (hrs.) 0.1 0.15
The standard price paid per pound of direct materials is P1.60. The standard rate for the labor is P8.
Budgeted fixed overhead P360,000
Budgeted variable overhead 480,000
The company expects to work 12,000 direct labor during the year, standard overhead rates are computed using this activity level. For every small stapler produced, the company produces data for the year are:
- Units produced: small staplers, 35,000; regular staplers, 70,000
- Direct materials purchased and used: 56,000 pounds at P1.55: 13,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending raw materials inventories.
- Direct labor: 14,800 hours: 3,600 hours for small stapler, and 11,200 hours for the regular. Total cost of labor: P114,700
- Variable overhead: P607,500
- Fixed overhead: P350,000
REQUIRE:
- Prepare a
standard cost sheet showing the unit costs for each product. - Compute the materials price and usage variance for each product
- Compute the labor rate an deficiency variance for each product
- Compute the variances for fixed and variable overhead.
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