Big Dog Company, a manufacturer of dog food, produces its product in 1,000-bag batches. The standard cost of each batch consists of 9,000 pounds of direct materials at $0.40 per pound, 48 direct labor hours at $8.50 per hour, and variable overhead cost (based on machine hours) at the rate of $10 per hour with 16 machine hours per batch. The following variable costs were incurred for the last 1,000-bag batch produced: Direct materials 9,300 pounds costing $3,578 were purchased and used Direct labor 45 hours costing $450 Variable overhead $225 Machine hours used 18 hours (a) Determine the actual and standard variable costs per bag of dog food produced, separated into direct materials, direct labor, and variable overhead. Round your answers to three decimal places. Actual Cost Standard Cost Direct materials 3.578 3.6 Direct labor .45 .408 Variable overhead .225 .16 Total variable costs per bag 4.253 4.168 (b) For the last 1,000-bag batch, determine the standard cost variances for direct materials, direct labor, and variable overhead. Round your answers to two decimal places. Materials price variance Answer Materials quantity variance 120 U Labor rate variance 67.5 U Labor efficiency variance Answer Variable overhead spending variance 45 U Variable overhead efficiency variance 20 U
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Determining Unit Costs,
Big Dog Company, a manufacturer of dog food, produces its product in 1,000-bag batches. The
| Direct materials | 9,300 pounds costing $3,578 were purchased and used |
| Direct labor | 45 hours costing $450 |
| Variable overhead | $225 |
| Machine hours used | 18 hours |
(a) Determine the actual and standard variable costs per bag of dog food produced, separated into direct materials, direct labor, and variable overhead.
Round your answers to three decimal places.
| Actual Cost | Standard Cost | |
|---|---|---|
| Direct materials | 3.578
|
3.6 |
| Direct labor | .45 |
.408 |
| Variable overhead | .225
|
.16 |
| Total variable costs per bag | 4.253
|
4.168
|
(b) For the last 1,000-bag batch, determine the standard cost variances for direct materials, direct labor, and variable overhead.
Round your answers to two decimal places.
| Materials price variance | Answer
|
|
| Materials quantity variance | 120
|
U
|
| Labor rate variance | 67.5
|
U
|
| Labor efficiency variance | Answer
|
|
| Variable overhead spending variance | 45
|
U
|
| Variable overhead efficiency variance | 20
|
U
|
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