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XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.50-liter can of solution call for 0.81 liters of material and four hours of labor. (0.81 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.30. The standard cost per hour for labor is $12. Overhead is applied at the rate of $16.78 per can. Expected production is 8,600 cans with fixed overhead per year of $54,868 and variable overhead of $10.40 per unit (a 0.50-liter can).
During 2021, 7,700 cans were produced; 12,400 liters of material were purchased at a cost of $54,560; 9,200 liters of material were used in production. The cost of direct labor incurred in 2021 was $353,100, based on an average actual wage rate of $11 per hour. Actual overhead for 2021 was $126,200.
Determine the standard cost per unit. (Round answer to 2 decimal places, e.g. 15.25.)
Calculate material, labor, and overhead variances. (Round intermediate calculations to 2 decimal places, e.g. 14.37 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)
Material Price Variance
Material Quantity Variance
Labor Rate Variance
Labor Efficiency Variance
Controllable Overhead Variance
Overhead Volume Variance
Expert Solution
Computation of the standard cost per unit:-
Standard cost per unit. = Standard material cost per unit + Standard labor cost per unit + Fixed overhead cost per unit + Variable overhead cost per unit
= (0.81 * $2.30) + (4 * $12) + ($54,868 / 8,600) + $10.40
= $1.86 + $48 + $6.38 + $10.40
= $66.64 per unit
Computation of the material price variance:-
Actual price of materials =$54,560 / 12,400
= $4.40
Material price variance = (Standard price - Actual price) * Actual quantity purchased
= ($2.30 - $4.40) * 12,400
= $2.10 * 12,400
= $26,040 (U)
Computation of the material quantity variance:-
Standard quantity = 0.81 * 7,700
= 6,237
Material quantity variance = (Standard quantity - Actual quantity used) * Standard price
= (6,237 - 9,200) * $2.30
= 2,963 * $2.30
= $6,815 (U)
Computation of the labor rate variance:-
Actual labor hours = $353,100 / $11
= 32,100
Labor rate variance = (Standard labor hour rate - Actual labor hour rate) * Actual labor hours
= ($12 - $11) * 32,100
= $32,100 (F)
Computation of the labor efficiency variance:-
Labor efficiency variance = (Standard labor hours - Actual labor hours) * Standard labor hour rate
= ((7,700 * 4) - 32,100) * $12
= (30,800 - 32,100) * $12
= 1,300 * $12
= $15,600 (U)
Computation of the controllable overhead variance:-
Budgeted Allowance Based on Standard Hours Allowed = (($10.40 * 7,700) + $54,868)
= $80,080 + $54,868
= $134,948
Controllable overhead variance = Actual factory overhead - Budgeted Allowance Based on Standard Hours Allowed
= $126,200 - $134,948
= $8,748 (U)
Computation of the overhead volume variance:-
Overhead volume variance = Budgeted Allowance Based on Standard Hours Allowed? - Overhead charged to production
= $134,948 - ($16.78 * 7,700)
= $134,948 - $129,206
= $5,742 (U)
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