Problem 9-26 (Algo) Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6] Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 8.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is
Problem 9-26 (Algo) Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6] Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 8.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is
Chapter1: Financial Statements And Business Decisions
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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.
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Problem 9-26 (Algo) Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6] Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 8.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is applied to production on the basis of direct labor-hours. During March, 600 backpacks were manufactured and sold. Selected information relating to the month’s production is given below: Materials Used Direct Labor Variable Manufacturing Overhead Total standard cost allowed* $ 15,360 $ 9,000 $ 1,800 Actual costs incurred $ 13,965 ? $ 2,985 Materials price variance ? Materials quantity variance $ 600 U Labor rate variance ? Labor efficiency variance ? Variable overhead rate variance ? Variable overhead efficiency variance ? *For the month's production. The following additional information is available for March’s production: Actual direct labor-hours 900 Difference between standard and actual cost per backpack produced during March $ 0.20 F Required: (Hint: It may be helpful to complete a general model diagram for direct materials, direct labor, and variable manufacturing overhead before attempting to answer any of the requirements.) 1. What is the standard cost of a single backpack? 2. What was the actual cost per backpack produced during March? 3. How many yards of material are required at standard per backpack? 4. What was the materials price variance for March if there were no beginning or ending inventories of materials? 5. What is the standard direct labor rate per hour? 6. What was the labor rate variance for March? The labor efficiency variance? 7. What was the variable overhead rate variance for March? The variable overhead efficiency variance? 8. Prepare a standard cost card for one backpack.
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