Question

Hayes Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. The standards per .5-gallon can of chemical call for .70 gallons of material and 2.0 hours of labor. (.70 gallons of material are needed to produce a .5-gallon can of product due to evaporation.) The standard cost per gallon of material is $5.30.The standard cost per hour for labor is $12.00.Overhead is applied at the rate of $8.95 per can. Expected production is 18,000 cans with fixed overhead per year of $35,100 and variable overhead of $7.00 per unit (a .5-gallon can).
During 2012, 19,000 cans were produced; 15,000 gallons of material were purchased at a cost of $87,750; 14,000 gallons of material were used in production. The cost of direct labor incurred in 2012 was $465,300 based on an average actual wage rate of $11.75 per hour. Actual overhead for 2012 was $170,000.

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



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  • CreatedSeptember 23, 2013
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