Cost Accounting Standard Cost Problem

ABC Company manufactures bikes.

Standard Direct Materials: each bike takes 3 lbs of metal at $1.60 per lb

Standard Direct Labor: each bike takes .25 hours to produce; Total labor cost $500,000.

Variable overhead is allocated based on Direct Labor Hours

Projected production:150,000 bikes.

Projected variable overhead costs: $200,000.

Projected fixed overhead costs: $310,000.

Actual

The company purchased $800,000 metal material at $1.50 lb.

550,000 lbs. of metal were used to make 175,000 bikes.

Actual Labor Costs: $500,000; Actual timecard labor hours 50,000

Actual variable OH: $225,000

Actual Fixed OH: $325,000

Calculate price and efficiency variances (Direct Material, Labor)

Calculate spending & efficiency variances (Variable OH)

Calculate production volume & spending variance (Fixed OH)