Managerial Accounting

1. Loper Corporation manufactures a single product. The standard cost per unit of product is shown below:

Direct materials — 2 pound at $5 per pound    $ 10.00
Direct labor — 2 hours at $12 per hour      24.00
Variable manufacturing overhead      12.00
Fixed manufacturing overhead        6.00
Total standard cost per unit    $52.00

The predetermined manufacturing overhead rate is $9 per direct labor hour ($18/2). It was computed from a master manufacturing overhead budget based on normal production of 15,000 direct labor hours (7,500 units) for the month. The master budget showed total variable costs of $90,000 ($6 per hour) and total fixed overhead costs of $45,000 ($3 per hour). Overhead is applied on the basis of direct labor hours. Actual costs for October in producing 7,400 units were as follows:

Direct materials (15,000 pounds)    $ 73,500
Direct labor (14,900 hours)     181,780
Variable overhead       88,990
Fixed overhead       44,000
Total manufacturing costs    $388,270

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.

Instructions: Compute all of the materials, labor and overhead variances. Your answer should include the material price variance, material quantity variance, labor price variance, labor quantity variance and total overhead variance. Label your answers (abbreviations are fine) and show all calculations.

 
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