Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard QuantityStandard Price or RateStandard CostDirect materials 5.8pounds$0.60per pound$3.48Direct labor 0.5hours$33.50per hour$16.75Variable manufacturing overhead 0.5hours$8.50per hour$4.25 During March, the following activity was recorded by the company: The company produced 2,400 units during the month.A total of 19,400 pounds of material were purchased at a cost of $13,580.There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.Variable manufacturing overhead costs during March totaled $14,061. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for March is:

Labor Efficiency Variance:-It is the difference between the actual hours taken for producing goods…

Answered: Puvo, Inc., manufactures a single…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity	Standard Price or Rate	Standard Cost
Direct materials		5.8	pounds	$	0.60	per pound	$	3.48
Direct labor		0.5	hours	$	33.50	per hour	$	16.75
Variable manufacturing overhead		0.5	hours	$	8.50	per hour	$	4.25

During March, the following activity was recorded by the company:

The company produced 2,400 units during the month.
A total of 19,400 pounds of material were purchased at a cost of $13,580.
There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.
During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.
Variable manufacturing overhead costs during March totaled $14,061.

The direct materials purchases variance is computed when the materials are purchased.

The labor efficiency variance for March is:

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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