omprehensive Standard Cost Variances

"Not only did our salespeople do a good job in meeting the sales budget this year, but out production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. Our $18,300 overall manufacturing cost variance is only 1.2% of the $1,536,000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year."

The company produces and sells a single product. The standard cost card for the product follows:

Standard Cost per Unit of Product:

Direct materials, 2 feet at $8.45 per foot
Direct labor, 1.4 direct labor hours at $16 per direct labor-hour
Variable overhead, 1.4 direct labor-hours at $2.5 per direct labor-hour
Fixed overhead, 1.4 direct labor-hours at $6 per direct labor-hour

The following information is available for the year just completed:
a. The company manufactured 30,000 units of product during the year
b. A total of 64,000 feet of material was purchased during the year at a cost of $547,200. All of this material was used to manufacture the 30,000 units. There was no beginning or ending inventories for the year.
c. The company worked 43,500 direct labor-hours during the year at a direct labor cost of $15.80 per hour.

Variable and Fixed overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs are as follows:

Budgeted fixed overhead costs.........................................$210,000
Actual variable overhead costs incurred..............................$108,000
Actual fixed overhead costs incurred..................................$211,800
Assume no beginning or ending inventory. Label Each variance below as Favorable or Unfavorable.

1. Compute the standard cost per unit of one product