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Kansas Company uses a standard cost accounting system
Kansas Company uses a standard cost accounting system. In 2020, the company produced 27,800 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,500 direct labor hours. During the year, 131,400 pounds of raw materials were purchased at $0.95 per pound. All materials purchased were used during the year.
a-If the materials price variance was $5,256 favorable, what was the standard materials price per pound?
b-If the materials quantity variance was $19,998 unfavorable, what was the standard materials quantity per unit?
c-What were the standard hours allowed for the units produced?
d-If the labor quantity variance was $8,400 unfavorable, what were the actual direct labor hours worked?
e-If the labor price variance was $18,072 favorable, what was the actual rate per hour?
f-If total budgeted manufacturing overhead was $343,400 at normal capacity, what was the predetermined overhead rate based on direct labor hours?
g-What was the standard cost per unit of product?
h-How much overhead was applied to production during the year?
i-Using one or more answers above, what were the total costs assigned to work in process?
Expert Solution
a)
Material price variance = (Actual price - Standard price) x Actual quantity
-$5,256 = ($0.95 - Standard price) * 131,400
-$5256/131,400 = $0.95 - Standard price
- $0.04 = $0.95 - Standard price
Standard price = $0.95 + $0.04 = $0.99 per pound
b)
Material quantity variance = (Actual quantity - Standard quantity) x Standard price per pound
$19,998 = (131,400 - Standard quantity) * $ 0.99
$19,998/$0.99 = (131,400 - Standard quantity)
20,200 = (131,400 - Standard quantity)
Standard quantity = 131,400 - 20,200 = 111,200
Standard quantity per unit = 111,200/27,800 units = 4 pounds
c)
Standard Hours Allowed for Units Produced = Standard Hours * Actual Units Produced
= 1.6*27,800 units
Standard Hours Allowed for Units Produced = 44,480 Hours
d)
Labor Quantity Variance = Standard Rate * (Standard Hours-Actual Hours)
-8,400 = $12 * (44,480-Actual Hours)
-8,400/12 = 44,480-Actual Hours
-700 = 44,480 - Actual Hours
Actual Hours = 44,480+700
Actual Hours = 45,180 Hours
e)
Labor Rate Variance = Actual Hours*(Standard Rate - Actual Rate)
18,072 = 45,180 * ($12 - Actual Rate)
18,072/45180 = $12 - Actual Rate
0.40 = $12 - Actual Rate
Actual Rate = $12 - 0.40
Actual Rate = $11.60
f)
Predetermined Overhead Rate = Total Budgeted Overhead/Budgeted Labor Hour
= $343,400/50,500
Predetermined Overhead Rate = $6.80
g)
Standard COst per Unit of Product:
Standard Material Price Unit (4*0.99) = 3.96
Standard Labor Rate per Unit (1.6*12) = 19,2
Standard Overhead Rate per Unit (1.6*6.80) = 10.88
Total Standard Cost per Unit = 34.04
h)
Overhead Applied = Actual Hours Worked*Predetermined Overhead rate
= 45,180*$6.80
Overhead Applied = $307,224
i)
Total Costs assigned = 27,800 Units*$34.04 = $946,312
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