Bennick Corporation - Analyzing Performance

Bennick Corporation produces a single component for motorcycles. Standard costs per unit of the product, based on a standard volume of 11,000 units, are as follows:

Materials (10 lbs at $1.50 per lb.) $15.00

Labor (2 hours at $6.00 per hour) 12.00

Variable overhead 2.00

Fixed overhead 8.00

Total standard cost $37.00

Actual costs and other information for 1986 were as follows:

Materials $226,800

Labor 166,320

Variable overhead 24,800

Fixed overhead 81,000

Total cost $498,920

Actual output 12,000 units

Actual cost per unit $41.58

According to Tom, the production department manager, "The production folks deserve a big thank-you for keeping costs in line.The labor negotiators conceded to a wage rate of $6.60 per hour, for a 10 percent overrun. On top of that, purchasing paid $1.80 for material they should have got at $1.50, a huge 20 percent excess expenditure. Despite these blunders, production managed to keep costs down to $41.58, only 12.4 percent over standard."

Bennick uses a just-in-time inventory system, so there are no beginning or ending materials inventories.

Required

Analysis of cost variances (materials, labor, overhead)