Avogadro Solutions prepares specialized liquid solutions that are used in a variety of industries. Its accounting system uses standard costs. The standards per .5-liter flask of solution call for 1.5 liters of material and 3.5 hours of labor. (1.5 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $4.00.The standard cost per hour for labor is $18.00.Overhead is applied at the rate of $15.00 per flask. Expected production is 7,000 flasks with fixed overhead per year of $35,000 and variable overhead of $10 per unit (a .5-liter flask).
During 2012, 6,000 flasks were produced; 13,000 liters of material were purchased at a cost of $58,500; 9,100 liters of material were used in production. The cost of direct labor incurred in 2012 was $376,250 based on an average actual wage rate of $17.50 per hour. Actual overhead for 2012 was $110,000.

a. Determine the standard cost per unit. Round to the nearest cent.
b. Calculate material, labor, and overhead variances.
c. List a possible cause for each variance.

  • CreatedSeptember 23, 2013
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