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P11-1A Costello Corporation

Price: $2.50

Costello Corporation manufactures a single product. The standard cost per unit
of product is shown below.

Direct materials - 1 pound plastic at $7.00 per pound  $7.00
Direct labor - 1.6 hours at $12.00 per hour  19.2
Variable manufacturing overhead  12
Fixed manufacturing overhead  4
Total standard cost per unit  $42.20

The predetermined manufacturing overhead rate is $10 per direct labor hour ($16.00 4
1.6). It was computed from a master manufacturing overhead budget based on normal
production of 8,000 direct labor hours (5,000 units) for the month. The master budget
showed total variable costs of $60,000 ($7.50 per hour) and total fixed overhead costs
of $20,000 ($2.50 per hour). Actual costs for October in producing 4,900 units were as

Direct materials (5,100 pounds)   36,720
Direct labor (7,500 hours)   93,750
Variable overhead   59,700
Fixed overhead   21,000
Total manufacturing costs   211,170

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.
(b) Compute the total overhead variance.

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