Spiro Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. 1.6 pounds Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.50 1 hour 20/hour $390,000 During Year 2, Spiro planned to produce 30,000 drip candles. Production lagged behind expectations, and it actually produced only 24,000 drip candles. At year-end, direct materials purchased and used amounted to 40,000 pounds at a unit price of $1.35 per pound. Direct labor costs were actually $18.75 per hour and 26,400 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $330,000. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor. f. Compute the fixed cost spending and volume variances.
Spiro Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. 1.6 pounds Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.50 1 hour 20/hour $390,000 During Year 2, Spiro planned to produce 30,000 drip candles. Production lagged behind expectations, and it actually produced only 24,000 drip candles. At year-end, direct materials purchased and used amounted to 40,000 pounds at a unit price of $1.35 per pound. Direct labor costs were actually $18.75 per hour and 26,400 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $330,000. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor. f. Compute the fixed cost spending and volume variances.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Spiro Company manufactures molded candles that are finished by hand. The company developed the following standards for a new
line of drip candles.
Amount of direct materials per candle
Price of direct materials per pound
Quantity of labor per unit
Price of direct labor per hour
Total budgeted fixed overhead
1.6 pounds
$
1.50
1 hour
$
$390,000
20/hour
During Year 2, Spiro planned to produce 30,000 drip candles. Production lagged behind expectations, and it actually produced only
24,000 drip candles. At year-end, direct materials purchased and used amounted to 40,000 pounds at a unit price of $1.35 per pound.
Direct labor costs were actually $18.75 per hour and 26,400 actual hours were worked to produce the drip candles. Overhead for the
year actually amounted to $330,000. Overhead is applied to products using a predetermined overhead rate based on estimated units.
Required
a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip
candle.
c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle.
e. Compute the price and usage variances for direct materials and direct labor.
f. Compute the fixed cost spending and volume variances.
Complete this question by entering your answers in the tabs below.
Reg A and B
Req C and D
Reg E
Req F
Compute the price and usage variances for direct materials and direct labor. (Indicate the effect of each variance by selecting
"F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Cost
Variance
Direct materials:
Price variance
Usage variance
Direct labor:
Price variance
Usage variance
< Req C and D
Req F >
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