Vernon 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 1.40 pounds 0.50 0.60 hours 8.60/hour 2$ $145,600 During Year 2, Vernon planned to produce 26,000 drip candles. Production lagged behind expectations, and it actually produced only 19,000 drip candles. At year-end, direct materials purchased and used amounted to 28,300 pounds at a unit price of $0.46 per pound. Direct labor costs were actually $8.10 per hour and 14,100 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $112,100. Overhead is applied to products using a predetermined overhead rate based on estimated units. Required a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle. e. Compute the price and usage variances for direct materials and direct labor.
Vernon Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.40 pounds 0.50 0.60 hours 8.60/hour 2$ $145,600 During Year 2, Vernon planned to produce 26,000 drip candles. Production lagged behind expectations, and it actually produced only 19,000 drip candles. At year-end, direct materials purchased and used amounted to 28,300 pounds at a unit price of $0.46 per pound. Direct labor costs were actually $8.10 per hour and 14,100 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $112,100. 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.
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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Transcribed Image Text:Vernon 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
1.40 pounds
$
0.50
0.60 hours
$
8.60/hour
$145,600
During Year 2, Vernon planned to produce 26,000 drip candles. Production lagged behind expectations, and it actually produced only
19,000 drip candles. At year-end, direct materials purchased and used amounted to 28,300 pounds at a unit price of $0.46 per pound.
Direct labor costs were actually $8.10 per hour and 14,100 actual hours were worked to produce the drip candles. Overhead for the
year actually amounted to $112,100. 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.
Req A and B
Req C and D
Req E
Req F
Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip
candle. (Round your answers to 2 decimal places.)
Standard
Cost
cost per unit
Direct material
Direct labor
Overhead
Total per candle
< Reg A and B
Req C and D
>
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