Landers Company manufactures a number of products. The standards relating to one of these

P11-12 Landers
Company manufactures a number of products. The standards relating to one of
these products are shown below, along with actual cost data for May.

Standard
Actual

Cost per
Cost

Unit

per Unit
Direct materials:
Standard: 1.80 feet at $3.00 per foot . . . . . . .
. . . . . . $ 5.40
Actual: 1.75 feet at $3.20 per foot . . . . . . . .
. . . . . . .

$ 5.60
Direct labor:
Standard: 0.90 hours at $18.00 per hour . . . . . .
. . . 16.20
Actual: 0.95 hours at $17.40 per hour . . . . . . .
. . . . .

16.53
Variable overhead:
Standard: 0.90 hours at $5.00 per hour . . . . . .
. . . . 4.50
Actual: 0.95 hours at $4.60 per hour . . . . . . .
. . . . .
.
4.37
Total cost per unit . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . $26.10
$26.50
Excess of actual cost over standard cost per unit .
. . . .

$0.40

The production superintendent was pleased when he
saw this report and commented: “This $0.40 excess cost is well within the 2
percent limit management has set for acceptable variances.
It’s obvious that there’s not much to worry about
with this product.”
Actual production for the month was 12,000 units.
Variable overhead cost is assigned to products on the basis of direct
labor-hours. There were no beginning or ending inventories of materials.

Required:
1. Compute the following variances for May:
a.Materials price and quantity variances.
b.Labor rate and efficiency variances.
c.Variable overhead rate and efficiency variances.
2. How much of the $0.40 excess unit cost is
traceable to each of the variances computed in (1) above.
3. How much of the $0.40 excess unit cost is
traceable to apparent inefficient use of labor time?
4. Do you agree that the excess unit cost is not of
concern?

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