Labor Variance
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Exercise 11-3 |
Kimm Company has gathered the following information about its product.
Direct materials: Each unit of product contains 3.20 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.70 pounds. Materials cost $5 per pound, but Kimm always takes the 4.07% cash discount all of its suppliers offer. Freight costs average $0.36 per pound.
Direct labor. Each unit requires 2.20 hours of labor. Setup, cleanup, and downtime average 0.11 hours per unit. The average hourly pay rate of Kimm’s employees is $11.90. Payroll taxes and fringe benefits are an additional $3.90 per hour.
Manufacturing overhead. Overhead is applied at a rate of $7.80 per direct labor hour.
Compute Kimm’s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)
Total standard cost per unit | $ |
(b) Compute the labor price and quantity variances.
Labor price variance | $ | |
Labor quantity variance | $ |
(c) Compute the labor price and quantity variances, assuming the standard is 3.82 hours of direct labor at $11.30 per hour.
Labor price variance | $ | |
Labor quantity variance | $ |
Problem 11-1A |
Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials—2 pound plastic at $7.67 per pound | $ 15.34 | |
Direct labor—2.00 hours at $12.00 per hour | 24.00 | |
Variable manufacturing overhead | 13.00 | |
Fixed manufacturing overhead | 19.00 | |
Total standard cost per unit | $71.34 |
The predetermined manufacturing overhead rate is $16 per direct labor hour ($32.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,600 direct labor hours (5,800 units) for the month. The master budget showed total variable costs of $75,400 ($6.50 per hour) and total fixed overhead costs of $110,200 ($9.50 per hour). Actual costs for October in producing 3,700 units were as follows.
Direct materials (7,600 pounds) | $ 59,128 | |
Direct labor (7,210 hours) | 88,250 | |
Variable overhead | 85,483 | |
Fixed overhead | 34,897 | |
Total manufacturing costs | $267,758 |
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.
(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)
Total materials variance | $ | |
Materials price variance | $ | |
Materials quantity variance | $ | |
Total labor variance | $ | |
Labor price variance | $ | |
Labor quantity variance | $ |
(b) Compute the total overhead variance.
Total overhead variance | $ |
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