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    Variance calculation

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    Putnam 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-1.5 hours at $12.00 per hour 18.00
    Variable manufacturing overhead 11.25
    Fixed manufacturing overhead 3.75
    Total standard cost per unit $40.00

    The predetermined manufacturing overhead rate is $10 per direct labor hour ($15.00 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 7,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $56,250 ($7.50 per hour) and total fixed overhead costs of $18,750 ($2.50 per hour). Actual costs for October in producing 4,900 units were as follows.

    Direct materials (5,100 pounds) $ 37,230
    Direct labor (7,000 hours) 87,500
    Variable overhead 56,170
    Fixed overhead 19,680
    Total manufacturing costs $200,580

    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.
    Hint:
    Compute variances.

    Instructions

    (a) Compute all of the materials and labor variances.

    (b) Compute the total overhead variance.

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    https://brainmass.com/economics/production/variance-calculation-284343

    Solution Summary

    The solution explains the calculation of material, labor and overhead variances

    $2.19