Prado Corporation manufactures and sells a single product. The company uses a standard cost system. The standard
Question:
Prado Corporation manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows:
Materials—1 lb plastic@$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.00
Direct labor—1.6 hr@$10.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.00
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.45
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.45
The charges to the manufacturing department for November,
when 5,000 units were produced, follow:
Materials—5,300 lb @$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,900
Direct labor—8,200 hr@$9.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,360
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,815
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,075
The purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 pounds were purchased at a price of $2.90 per pound.
Required:
Calculate the following variances from standard costs for the data given,
1. Materials quantity.
2. Materials purchase price (at time of purchase).
3. Labor efficiency.
4. Labor rate.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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