Pests Away Company manufactures a product effective in controlling beetles.The company uses a standard cost system and a flexible budget.Standard cost of a gallon is as follows:

Direct material:

2 quarts of A $14

4 quarts of B 16

Total direct material $30

Direct labor:

2 hours 16

Manufacturing overhead 12

Total $58

The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours.Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following:

Production: 5,000 gallons

Direct material:

A 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used

B 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used

Direct labor: 9,800 hours worked at a cost of $79,380

Overhead: Fixed $48,100

Variable 21,000

Total overhead $69,100

Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute the following variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. MOH efficiency variance g. MOH spending variance, both fixed and variable

Question

Pests Away Company manufactures a product effective in controlling beetles.The company uses a standard cost system and a flexible budget.Standard cost of a gallon is as follows:

Direct material:
2 quarts of A	$14
4 quarts of B	16
Total direct material	$30

Direct labor:
2 hours	16
Manufacturing overhead	12
Total	$58

The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours.Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following:

Production:	5,000 gallons
Direct material:
A	12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used
B	20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used
Direct labor:	9,800 hours worked at a cost of $79,380
Overhead:	Fixed	$48,100
	Variable	21,000
	Total overhead	$69,100

Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute the following variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. MOH efficiency variance g. MOH spending variance, both fixed and variable

Quizplus · Accepted Answer

The Answer of Pests Away Company manufactures a product effective in controlling beetles.The company uses a standard cost system and a flexible budget.Standard cost of a gallon is as follows:

Direct material:
2 quarts of A	$14
4 quarts of B	16
Total direct material	$30

Direct labor:
2 hours	16
Manufacturing overhead	12
Total	$58

The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours.Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following:

Production:	5,000 gallons
Direct material:
A	12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used
B	20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used
Direct labor:	9,800 hours worked at a cost of $79,380
Overhead:	Fixed	$48,100
	Variable	21,000
	Total overhead	$69,100

Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute the following variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. MOH efficiency variance g. MOH spending variance, both fixed and variable

Pests Away Company Manufactures a Product Effective in Controlling Beetles