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Standard Costs for Units of Products

Kwikeze Company set the following standard costs for one unit of its product.

Direct materials ((4.0 Ibs. @ $6.0 per Ib.) $ 24.00
Direct labor (1.8 hrs. @ $11.0 per hr.) 19.80
Overhead (1.8 hrs. @ $18.50 per hr.) 33.30

Total standard cost $ 77.10

The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.

Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials $ 15,000
Indirect labor 75,000
Power 15,000
Repairs and maintenance 30,000

Total variable overhead costs $ 135,000
Fixed overhead costs
Depreciation building 25,000
Depreciation machinery 71,000
Taxes and insurance 17,000
Supervision 251,500

Total fixed overhead costs 364,500

Total overhead costs $ 499,500

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (61,500 Ibs. @ $6.10 per lb.) $ 375,150
Direct labor (30,000 hrs. @ $11.30 per hr.) 339,000
Overhead costs
Indirect materials $ 43,000
Indirect labor 177,250
Power 17,250
Repairs and maintenance 34,500
Depreciation?building 25,000
Depreciation?machinery 95,850
Taxes and insurance 15,300
Supervision 251,500 659,650

Total costs $ 1,373,800

Compute the direct materials cost variance, including its price and quantity variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Direct materials cost variance $
Price variance $
Quantity variance $

Compute the direct labor cost variance, including its rate and efficiency variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Direct labor cost variance $
Rate variance $
Efficiency variance $

Solution Summary

The following posting helps with various standard cost problems.

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