Standard Costs

Beginning of the Period

Standards (standard quantity of input x standard price of input):

Direct materials: 3 lbs per unit * $2 per pound = $6 per unit

Direct labor: hour per unit * $16 per hour = $8 per unit

Factory overhead = $40,000 (fixed) + $4 per direct labor hour (variable)

Estimated production = 10,000 units of output (standard volume)

Required:

1. Calculate the total standard direct labor hours allowed for estimated production.

2. Calculate the estimated total overhead at the estimated level of production.

3. Calculate the overhead rate.

End of the Period

Actual results

Direct materials purchased and used in production: 35,000 lbs

Actual price of direct materials purchased: $2.10 per pound

Direct labor: 5,600 hours @ $15 per hour

Total overhead incurred: $65,000

Actual units produced during the period: 11,000

Required:

4. Calculate the direct material price variance.

5. Calculate the direct material quantity variance.

6. Calculate the direct labor price variance.

7. Calculate the direct labor quantity variance.

8. Calculate the overhead variance in a four variance approach (two for variable and two for

fixed).

Actual				Flexible Budget
AP input * AQ input		SP input * AQ input		SP input * SQ input
	Difference = price variance		Difference = quantity variance
Direct materials
Direct labor
Variable overhead
Fixed overhead