Seacrest Manufacturing produces ceramic teapots. Seacrest allocates overhead based on the number of direct labor hours. The company is looking into using a standard costing system and has developed the following standards (one “unit” is a batch of 100 teapots):

Actual cost and operating data from the most recent month are as follows:

All manufacturing overhead is allocated on the basis of direct labor hours.

Requirements:

1. Calculate the standard cost of one batch.
2. Calculate the following variances:

a. The direct material variances.

b. The direct labor variances.

c. The variable manufacturing overhead variances.

d. The fixed manufacturing overhead.
3. Have the company’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why or why not?
4. Describe how the company’s managers can benefit from the standard costing system. Do you think the company should continue with the standard costing system?

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Standards: Direct material 30 pounds per batch at $3.00 per pound Direct labor 2.0 hours per batch at $20.00 per hour Variable MOH standard rate $2.00 per direct labor hour Predetermined fixed MOH standard rate $7.00 per direct labor hour Total budgeted fixed MOH cost $1,670