Pure Corporation Makes a Product with the Following Standard Costs

question 147

Essay

Pure Corporation makes a product with the following standard costs:
$$\begin{array} { | l | c | c | c | } \hline \text { Imputs } & \begin{array} { c } \text { Standard } \\\text { Quantiy } \\\text { or Hours }\end{array} & \begin{array} { c } \text { Standard } \\\text { Price } \\\text { or Rate }\end{array} & \begin{array} { c } \text { Standard } \\\text { Cost } \\\text { Per Unit }\end{array} \\\hline \begin{array} { l } \text { Direct } \\\text { materials }\end{array} & 4.3 \text { pounds } & \begin{array} { c } \$ 6.00 \text { per } \\\text { pound }\end{array} & \$ 25.80 \\\hline \text { Direct labor } & 0.7 \text { hours } & \begin{array} { c } \$ 20.00 \text { per } \\\text { hour }\end{array} & \$ 14.00 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & 0.7 \text { hours } & \begin{array} { c } \$ 2.00 \text { per } \\\text { hour }\end{array} & \$ 1.40 \\\hline\end{array}$$ The company reported the following results concerning this product in September.
$$\begin{array} { | l | r | } \hline \text { Originally budgeted output } & 1,900 \text { units } \\\hline \text { Actual output } & 1,700 \text { units } \\\hline \text { Raw materials used in production } & 7,210 \text { pounds } \\\hline \text { Purchases of raw materials } & 7,600 \text { pounds } \\\hline \text { Actual direct labor-hours } & 1,260 \text { hours } \\\hline \text { Actual cost of raw materials purchases } & \$ 43,320 \\\hline \text { Actual direct labor cost } & \$ 25,578 \\\hline \text { Actual variable overhead cost } & \$ 2,394 \\\hline\end{array}$$
The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased.Required:
a.Compute the materials quantity variance.b.Compute the materials price variance.c.Compute the labor efficiency variance.d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

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Definitions:

Bottleneck Hour

The time period in a production process where the flow is constricted due to limitations in capacity or resources, causing delays.

Variable Cost Method

An accounting approach where variable costs are expensed as incurred and fixed costs are systematically allocated over time, typically used in costing and decision-making.

Cost-Plus Approach

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost.

Fixed Manufacturing Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance for a manufacturing facility.