Essay
Pests Away Company manufactures a product effective in controlling beetles.The company uses a standard cost system and a flexible budget.Standard cost of a gallon is as follows:
| Direct material: | |
| 2 quarts of A | $14 |
| 4 quarts of B | 16 |
| Total direct material | $30 |
| Direct labor: | |
| 2 hours | 16 |
| Manufacturing overhead | 12 |
| Total | $58 |
Actual results for the period indicated the following:
| Production: | 5,000 gallons | |
| Direct material: | ||
| A | 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used | |
| B | 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used | |
| Direct labor: | 9,800 hours worked at a cost of $79,380 | |
| Overhead: | Fixed | $48,100 |
| Variable | 21,000 | |
| Total overhead | $69,100 |
Required:
1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours?
2. Compute the following variances:
a. Total material price variance
b. Total material quantity variance
c. Labor rate variance
d. Labor efficiency variance
e. MOH volume variance
f. MOH efficiency variance
g. MOH spending variance, both fixed and variable
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