PROBLEM

1. The following standard costs were developed for one of Commodore Company's products:

STANDARD COST CARD

PER UNIT

Direct materials: 4 pounds ´ $5 per pound $20.00

Direct labor: 1.5 hours ´ $20 per hour 30.00
Variable overhead: $10 per hour ?  
Fixed overhead    ?  
   Total standard cost per unit    ?  

The following information is available regarding the company's operations for the period:

Units produced 15,000

Materials purchased 90,000 pounds at $3.60 per pound
Materials used 80,000 pounds
Direct labor 9,000 hours at $16.50 per hour
Overhead incurred:
   Variable $220,000
   Fixed $640,000

Budgeted fixed overhead for the period is $600,000, and expected capacity for the period is 20,000 direct
labor hours.

Required:

a. Calculate the standard fixed overhead rate.

b. Complete the standard cost card for the product.

ANS:
a. $30 per DLH $600,000/20,000 hours

b. STANDARD COST CARD

PER UNIT

Direct materials: 4 pounds ´ $5 per pound $ 20.00

Direct labor: 1.5 hours ´ $20 per hour 30.00
Variable overhead: 1.5 hours ´ $10 per hour 15.00
Fixed overhead: 1.5 hours ´ $30 per hour   45.00
   Total standard cost per unit $110.00

DIF: 2 REF: p. 371-372 OBJ: 2

NAT: AACSB Analytic | IMA Performance measures
2. Lisle Manufacturing has developed the following standards for one of its products:

STANDARD VARIABLE COST CARD

ONE UNIT OF PRODUCT

Direct materials: 10 yards ´ $10 per yard $100.00

Direct labor: 4 hours ´ $16 per hour 64.00
Variable overhead: 4 hours ´ $10 per hour   40.00
   Total standard variable cost per unit $204.00

The company records materials price variances at the time of purchase.

During August, Lisle purchased 16,000 yards of material costing $169,600 and used 12,500 yards in its
manufacturing process. There was no material inventory at August 1. Lisle recorded a total of 4,600 direct
labor hours worked for a total payroll of $72,680. Lisle manufactured 1,200 units in August.

Required:

a. Calculate the materials price variance and indicate whether it is favorable or unfavorable.

b. Calculate the materials usage variance and indicate whether it is favorable or

unfavorable.

c. Calculate the labor rate variance and indicate whether it is favorable or unfavorable.

d. Calculate the labor efficiency variance and indicate whether it is favorable or

unfavorable.

ANS:
a. $9,600 U $169,600 - (16,000 yards ´ $10)
b. $5,000 U $10 ´ [12,500 yards - (1,200 units ´ 10 yards)]
c. $920 F $72,680 - (4,600 hours ´ $16)
d. $3,200 F $16 ´ [4,600 hours - (1,200 units ´ 4 hours)]

DIF: 2 REF: p. 376-381 OBJ: 4

NAT: AACSB Analytic | IMA Performance measures
3. Georgia Manufacturing Company has developed the following standards for one of its products:

STANDARD VARIABLE COST CARD

ONE UNIT OF PRODUCT

Direct materials: 6 yards ´ $4.50 per yard $27.00

Direct labor: 2.5 hours ´ $5 per hour 12.50
Variable overhead: 2.5 hours ´ $4 per hour  10.00
   Total standard variable cost per unit $49.50

The company records materials price variances at the time of purchase.

The following activities occurred during the month of April:

Materials purchased 14,000 yards costing $57,750

Materials used 12,500 yards
Units produced 2,000 units
Direct labor 4,500 hours costing $24,300

Required:

a. Calculate the materials price variance and indicate whether it is favorable or unfavorable.

b. Calculate the materials usage variance and indicate whether it is favorable or unfavorable.

c. Calculate the labor rate variance and indicate whether it is favorable or unfavorable.

d. Calculate the labor efficiency variance and indicate whether it is favorable or unfavorable.

ANS: