Costello Corporation manufactures a single product The stand

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials-2 pound plastic at $6.84 per pound Direct labor-2.50 hours at $12.00 per hour Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit $13.68 30.00 17.50 12.50 $73.68 The predetermined manufacturing overhead rate is $12 per direct labor hour ($30.00 2.50). It was computed from a master manufacturing overhead budget based on normal production of 13,250 direct labor hours (5,300 units) for the month. The master budget showed total variable costs of $92,750 ($7.00 per hour) and total fixed overhead costs of $66,250 ($5.00 per hour). Actual costs for October in producing 4,500 units were as follows Direct materials (9,130 pounds) Direct labor (11,070 hours) Variable overhead Fixed overhead 63,910 135,829 96,793 40,027 $336,559 Total manufacturing costs

Solution

Costello Corportion: Std material qty allowed (4500*2): 9000 pounds Std price per pound: 6.84 per pound Actual quantity used: 9130 pounds Actual price per pound: (63910/9130): 7 per pound Total Material Cost variance: Std qty*Std price -Actual Qty*Actual pricec 9000*6.84 - 9130*7 = 2350 unfav Material price variance: Actual Qty (Std price-Actual price) 9130 (6.84-7.00)= $ 1460.80 unfav Material Qty variance: Std price (Std qty-Aactual qty) 6.84 (9000-9130)= $ 889.20 unfav Labour hours allowed Std (4500*2.50): 11250 hours Std labour rate per hour: 12. Actual hours used: 11070 hours Actual rate per hour: (135829/11070):12.27 per hour Total Labour cost variance: Std hours*Std rate -Actual Hours*Aactual rate 11250*12 - 11070*12.27 = 829 Unfav Labour rate variance: Actual hours (Std rate-Actual rate) 11070 (12-12.27)= 2989 Unfav Labour efficiency variance: Std rate (Std hours-Actual hours) 12.00 (11250-11070)= 2160 Fav