Reeves Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles:
Amount of direct materials per candle ...... 1.6 pounds
Price of direct materials per pound ........ $1.20
Quantity of labor per unit ........... 1 hour
Price of direct labor per hour ......... $16/hour
Total budgeted fixed overhead ......... $312,000
During 2013, Reeves planned to produce 30,000 drip candles. Production lagged behind expectations, and it actually produced only 24,000 drip candles. At year-end, direct materials purchased and used amounted to 40,000 pounds at a unit price of $1.08 per pound. Direct labor costs were actually $15.00 per hour and 26,400 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $264,000. Overhead is applied to products using a predetermined overhead rate based on estimated units.

Round all computations to two decimal places.
a. Compute the standard cost per candle for direct materials, direct labor, and overhead.
b. Determine the total standard cost for one drip candle.
c. Compute the actual cost per candle for direct materials, direct labor, and overhead.
d. Compute the total actual cost per candle.
e. Compute the price and usage variances for direct materials and direct labor. Identify any variances that Reeves should investigate. Offer possible cause(s) for the variances.
f. Compute the fixed cost spending and volume variances. Explain your findings.
g. Although the individual variances (price, usage, and overhead) were large, the standard cost per unit and the actual cost per unit differed by only a few cents. Explain why.

  • CreatedFebruary 07, 2014
  • Files Included
Post your question