10-17

You have recently accepted a position with Lorthen Inc. As part of your duties, you review the variances that are reported for each period and make a presentation to the company's executive commitee. Earlier this morning, you recieved the variances for one of the company's major products for the most recent period. After reveiwing the variances and organizing the data for your presentation, you accidentally placed the material on top of some papers that were going to the shredder. In the middle of lunch you suddenly realized your mistake and dashed to the shredding room. There you found the operator busily feeding your pages through the machine. You pulled part of one page from the machine.

Standard Cost Card
Direct Materials, 2.0 meters at $16.00 per meter	$32.00
Direct Labor, 1.0 hours at $15.00 per hour	$15.00
Variable Overhead, 1.0 hours at $9.00 per hour	$9.00

	Total Standard Cost	Quantity of Efficiency Variance	Price or Rate Variance
Direct Materials	$608,000	$32,000 U	$11,600 F
Direct Labor	$285,000	$15,000 U	$4,000 U
Variable Overhead	$171,000	Ruined by shredder	$4,000 F

The standard for variable overhead is based on direct labor-hour. All of the materials purchased during the period were used in production.

USE THE THREE COLUMN APPROACH FOR DIRECT MATERIALS, DIRECT LABOR, AND VARIABLE OVERHEAD.

1. How many units were produced during the period?

2. How many meters of direct materials were purchased and used in productions?

3. What was the actual cost per meter of material?

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate per direct labor-hour?

6. How much actual variable manufacturing overhead cost was incurred during the period?