Michael Roberts is a cost accountant and business analyst for HP Clothing Company (HPCC), which manufactures expensive T-shirts. HPCC uses two direct cost categories: direct materials and direct manufacturing labor. It allocates manufacturing overhead to production based upon labor hours used. At the beginning of 2020, HPCC adopted the following standards for each T-shirt: Standard Quantity Standard Price Or Hour 3.1 kg Or Rate $9 /kg Input Direct materials Direct labor 2 hours $8/hour Variable overhead 2 hours $5 /hour Actual results for April 2020 were as follows: Production 3,200 T-shirts Direct materials purchased Direct materials used 12,900 kg. at $10 kg 9,000 kg 7,200 hours for $59,000 Direct labor Variable manufacturing overhead $ 35,600 Required: a) Compute the standard variable product cost per unit. b) For the month of April 2020, compute the following variances, indicating whether each is favorable or unfavorable: i. Direct materials price variance, based on purchases ii. Direct materials quantity variance Direct labor rate variance iii. iv. Direct labor efficiency variance v. Variable manufacturing overhead rate variance vi. Variable manufacturing overhead efficiency variance c) Explain the possible reasons of any two unfavorable variances for direct costs and suggest the way to rectify them.
Michael Roberts is a cost accountant and business analyst for HP Clothing Company (HPCC), which manufactures expensive T-shirts. HPCC uses two direct cost categories: direct materials and direct manufacturing labor. It allocates manufacturing overhead to production based upon labor hours used. At the beginning of 2020, HPCC adopted the following standards for each T-shirt: Standard Quantity Standard Price Or Hour 3.1 kg Or Rate $9 /kg Input Direct materials Direct labor 2 hours $8/hour Variable overhead 2 hours $5 /hour Actual results for April 2020 were as follows: Production 3,200 T-shirts Direct materials purchased Direct materials used 12,900 kg. at $10 kg 9,000 kg 7,200 hours for $59,000 Direct labor Variable manufacturing overhead $ 35,600 Required: a) Compute the standard variable product cost per unit. b) For the month of April 2020, compute the following variances, indicating whether each is favorable or unfavorable: i. Direct materials price variance, based on purchases ii. Direct materials quantity variance Direct labor rate variance iii. iv. Direct labor efficiency variance v. Variable manufacturing overhead rate variance vi. Variable manufacturing overhead efficiency variance c) Explain the possible reasons of any two unfavorable variances for direct costs and suggest the way to rectify them.
Chapter8: Standard Costs And Variances
Section: Chapter Questions
Problem 4PA: April Industries employs a standard costing system in the manufacturing of its sole product, a park...
Related questions
Question
Transcribed Image Text:Michael Roberts is a cost accountant and business analyst for HP Clothing Company (HPCC),
which manufactures expensive T-shirts. HPCC uses two direct cost categories: direct materials
and direct manufacturing labor. It allocates manufacturing overhead to production based upon
labor hours used.
At the beginning of 2020, HPCC adopted the following standards for each T-shirt:
Standard Quantity Standard Price
Or Hour
3.1 kg
Or Rate
$9 /kg
Input
Direct materials
Direct labor
2 hours
$8/hour
Variable overhead
2 hours
$5 /hour
Actual results for April 2020 were as follows:
Production
3,200 T-shirts
Direct materials purchased
Direct materials used
12,900 kg. at $10 kg
9,000 kg
7,200 hours for $59,000
Direct labor
Variable manufacturing overhead $ 35,600
Required:
a) Compute the standard variable product cost per unit.
b) For the month of April 2020, compute the following variances, indicating whether each is
favorable or unfavorable:
i. Direct materials price variance, based on purchases
ii. Direct materials quantity variance
Direct labor rate variance
iii.
iv. Direct labor efficiency variance
v. Variable manufacturing overhead rate variance
vi. Variable manufacturing overhead efficiency variance
c) Explain the possible reasons of any two unfavorable variances for direct costs and suggest
the way to rectify them.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning